The European Securities and Markets Authority has recommended novel approaches for testing the knowledge and competence of crypto asset service providers’ staff. This step is part of the European Union’s overall initiative towards crypto space regulation under the Markets in Crypto-Assets Regulation.
These guidelines are designed to ensure individuals advising on or supplying data on crypto assets attain a minimum standard of competence. The MiCA has been published on 9 June 2023, and its requirements shall apply on 30 December 2024. Under Article 81, ESMA will develop guidelines for testing the knowledge of staff.
With crypto assets becoming more accessible to retail investors, concerns have risen about market risks, particularly for those unfamiliar with the industry. ESMA’s proposal seeks to mitigate these risks by setting minimum competence requirements for staff handling crypto-related services.
The guidelines borrow from other regulations, such as MiFID II, and apply them to crypto-specific matters such as cybersecurity and volatility. The strategy also ensures proportionality, with more complex and larger firms expected to attain higher quality levels.
Employees advising on crypto assets must be more knowledgeable than those supplying information. Knowledge of firm policies on compliance is also a key need.
Information providers need to understand virtual assets’ intrinsic nature and associated risks, such as their market structure, fees, and volatility. They must also be qualified under professional requirements and undertake continuing professional development (CPD).
Advisors must also fulfill these same requirements and be able to apply knowledge of portfolio management and suitability requirements. There are minimum training and experience requirements for individuals advising clients on strategy.
Crypto asset service providers’ competence systems
Crypto asset service providers must implement systems for testing and maintaining staff competence. Competent authorities will expect proof of compliance with such requirements. The goal of this action is to reinforce protections for investors, stability of markets, and trust in the crypto space.
ESMA is also calling for feedback on the draft guidelines, with particular regard for minimum qualification requirements and CPD requirements. Stakeholders need to respond on or before 22 April 2025.
This consultation process will also facilitate streamlining of the guidelines before their eventual rollout. The recommended regulations are also a step towards setting up a stable regulatory regime for the burgeoning crypto space.
