Vertically integrated crypto firms aren’t outlawed under new crypto rules, but they do have to comply with new requirements on dealing with and disclosing conflicts of interest, the European Securities and Markets Authority (ESMA) says.
The regulator published its final report on the application of certain provisions of new rules for cryptoasset providers, which details the results of a consultation and sets out draft technical standards for complying with the rules.
Among other things, those draft standards address the vertical integration of crypto providers; provide guidance on complying with the requirements for identifying, managing and disclosing conflicts at crypto firms; and aim to align with draft rules from the European Banking Authority on asset-referenced tokens, such as stablecoins.
In the report, ESMA stresses that, while the rules don’t explicitly prohibit vertically integrated crypto firms, these firms are subject to the new rules of dealing with conflicts of interest.
As with traditional financial firms such as investment firms, crypto firms “may be vertically integrated and offer a variety of cryptoasset services and other activities,” it said. “However, where such combination gives rise to conflicts of interests, such conflicts must be duly identified, prevented, managed and disclosed.”
The final report has been submitted to the European Commission, which has three months to decide whether to adopt the guidance.