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Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets, and amending Regulations (EU) No 1093/2010 and (EU) No 1095/2010 and Directives 2013/36/EU and (EU) 2019/1937 (Text with EEA relevance)

Type Regulation

Publication 2023-06-09

Last updated 2024-01-09

State In force

Department Council of the European Union, European Parliament

Source EUR-Lex

articles 150

Reform history JSON API

(d) a programme of operations, setting out the types of crypto-asset services that the applicant crypto-asset service provider intends to provide, including where and how those services are to be marketed;

(e) proof that the applicant crypto-asset service provider meets the requirements for prudential safeguards set out in Article 67;

(f) a description of the applicant crypto-asset service provider’s governance arrangements;

(g) proof that members of the management body of the applicant crypto-asset service provider are of sufficiently good repute and possess the appropriate knowledge, skills and experience to manage that provider;

(h) the identity of any shareholders and members, whether direct or indirect, that have qualifying holdings in the applicant crypto-asset service provider and the amounts of those holdings, as well as proof that those persons are of sufficiently good repute;

(i) a description of the applicant crypto-asset service provider’s internal control mechanisms, policies and procedures to identify, assess and manage risks, including money laundering and terrorist financing risks, and business continuity plan;

(j) the technical documentation of the ICT systems and security arrangements, and a description thereof in non-technical language;

(k) a description of the procedure for the segregation of clients’ crypto-assets and funds;

(l) a description of the applicant crypto-asset service provider’s complaints-handling procedures;

(m) where the applicant crypto-asset service provider intends to provide custody and administration of crypto-assets on behalf of clients, a description of the custody and administration policy;

(n) where the applicant crypto-asset service provider intends to operate a trading platform for crypto-assets, a description of the operating rules of the trading platform and of the procedure and system to detect market abuse;

(o) where the applicant crypto-asset service provider intends to exchange crypto-assets for funds or other crypto-assets, a description of the commercial policy, which shall be non-discriminatory, governing the relationship with clients as well as a description of the methodology for determining the price of the crypto-assets that the applicant crypto-asset service provider proposes to exchange for funds or other crypto-assets;

(p) where the applicant crypto-asset service provider intends to execute orders for crypto-assets on behalf of clients, a description of the execution policy;

(q) where the applicant crypto-asset service provider intends to provide advice on crypto-assets or portfolio management of crypto-assets, proof that the natural persons giving advice on behalf of the applicant crypto-asset service provider or managing portfolios on behalf of the applicant crypto-asset service provider have the necessary knowledge and expertise to fulfil their obligations;

(r) where the applicant crypto-asset service provider intends to provide transfer services for crypto-assets on behalf of clients, information on the manner in which such transfer services will be provided;

(s) the type of crypto-asset to which the crypto-asset service relates.

For the purposes of paragraph 2, points (g) and (h), an applicant crypto-asset service provider shall provide proof of all of the following:

(a) for all members of the management body of the applicant crypto-asset service provider, the absence of a criminal record in respect of convictions and the absence of penalties imposed under the applicable commercial law, insolvency law and financial services law, or in relation to anti-money laundering, and counter-terrorist financing, to fraud or to professional liability;

(b) that the members of the management body of the applicant crypto-asset service provider collectively possess the appropriate knowledge, skills and experience to manage the crypto-asset service provider and that those persons are required to commit sufficient time to perform their duties;

(c) for all shareholders and members, whether direct or indirect, that have qualifying holdings in the applicant crypto-asset service provider, the absence of a criminal record in respect of convictions or the absence of penalties imposed under the applicable commercial law, insolvency law and financial services law, or in relation to anti-money laundering and counter-terrorist financing, to fraud or to professional liability.

Competent authorities shall not require an applicant crypto-asset service provider to provide any information referred to in paragraphs 2 and 3 of this Article that they have already received under the respective authorisation procedures in accordance with Directive 2009/110/EC, 2014/65/EU or (EU) 2015/2366, or pursuant to national law applicable to crypto-asset services prior to 29 June 2023, provided that such previously submitted information or documents are still up-to-date.

ESMA, in close cooperation with EBA, shall develop draft regulatory technical standards to further specify the information referred to in paragraphs 2 and 3.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

ESMA, in close cooperation with EBA, shall develop draft implementing technical standards to establish standard forms, templates and procedures for the information to be included in the application for authorisation as a crypto-asset service provider.

ESMA shall submit the draft implementing technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 63

Assessment of the application for authorisation and grant or refusal of authorisation

Competent authorities shall promptly, and in any event within five working days of receipt of an application under Article 62(1), acknowledge receipt thereof in writing to the applicant crypto-asset service provider.

Competent authorities shall, within 25 working days of receipt of an application under Article 62(1), assess whether that application is complete by checking that the information listed in Article 62(2) has been submitted.

Where the application is not complete, competent authorities shall set a deadline by which the applicant crypto-asset service provider is to provide any missing information.

Competent authorities may refuse to review applications where such applications remain incomplete after the expiry of the deadline set by them in accordance with paragraph 2, second subparagraph.

Once an application is complete, competent authorities shall promptly notify the applicant crypto-asset service provider thereof.

Before granting or refusing authorisation as a crypto-asset service provider, competent authorities shall consult the competent authorities of another Member State where the applicant crypto-asset service provider is in one of the following positions in relation to a credit institution, a central securities depository, an investment firm, a market operator, a UCITS management company, an alternative investment fund manager, a payment institution, an insurance undertaking, an electronic money institution or an institution for occupational retirement provision, authorised in that other Member State:

(a) it is its subsidiary;

(b) it is a subsidiary of the parent undertaking of that entity; or

Before granting or refusing an authorisation as a crypto-asset service provider, competent authorities:

(a) may consult the competent authorities for anti-money laundering and counter-terrorist financing, and financial intelligence units, in order to verify that the applicant crypto-asset service provider has not been the subject of an investigation into conduct relating to money laundering or terrorist financing;

(b) shall ensure that the applicant crypto-asset service provider that operates establishments or relies on third parties established in high-risk third countries identified pursuant to Article 9 of Directive (EU) 2015/849 complies with the provisions of national law transposing Articles 26(2), 45(3) and 45(5) of that Directive;

(c) shall, where appropriate, ensure that the applicant crypto-asset service provider has put in place appropriate procedures to comply with the provisions of national law transposing Article 18a(1) and (3) of Directive (EU) 2015/849.

Where close links exist between the applicant crypto-asset service provider and other natural or legal persons, competent authorities shall grant authorisation only if those links do not prevent the effective exercise of their supervisory functions.

Competent authorities shall refuse authorisation if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with which the applicant crypto-asset service provider has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions.

Competent authorities shall, within 40 working days from the date of receipt of a complete application, assess whether the applicant crypto-asset service provider complies with this Title and shall adopt a fully reasoned decision granting or refusing an authorisation as a crypto-asset service provider. Competent authorities shall notify the applicant of their decision within five working days of the date of that decision. That assessment shall take into account the nature, scale and complexity of the crypto-asset services that the applicant crypto-asset service provider intends to provide.

10.

Competent authorities shall refuse authorisation as a crypto-asset service provider where there are objective and demonstrable grounds that:

(a) the management body of the applicant crypto-asset service provider poses a threat to its effective, sound and prudent management and business continuity, and to the adequate consideration of the interest of its clients and the integrity of the market, or exposes the applicant crypto-asset service provider to a serious risk of money laundering or terrorist financing;

(b) the members of the management body of the applicant crypto-asset service provider do not meet the criteria set out in Article 68(1);

(c) the shareholders or members, whether direct or indirect, that have qualifying holdings in the applicant crypto-asset service provider do not meet the criteria of sufficiently good repute set out in Article 68(2);

(d) the applicant crypto-asset service provider fails to meet or is likely to fail to meet any of the requirements of this Title.

11.

ESMA and EBA shall jointly issue guidelines in accordance with Article 16 of Regulation (EU) No 1095/2010 and Article 16 of Regulation (EU) No 1093/2010, respectively, on the assessment of the suitability of the members of the management body of the applicant crypto-asset service provider and of the shareholders or members, whether direct or indirect, that have qualifying holdings in the applicant crypto-asset service provider.

ESMA and EBA shall issue the guidelines referred to in the first subparagraph by 30 June 2024.

12.

Competent authorities may, during the assessment period provided for in paragraph 9, and no later than on the 20th working day of that period, request any further information that is necessary to complete the assessment. Such request shall be made in writing to the applicant crypto-asset service provider and shall specify the additional information needed.

The assessment period under paragraph 9 shall be suspended for the period between the date of request for missing information by the competent authorities and the receipt by them of a response thereto from the applicant crypto-asset service provider. The suspension shall not exceed 20 working days. Any further requests by the competent authorities for completion or clarification of the information shall be at their discretion but shall not result in a suspension of the assessment period under paragraph 9.

13.

Competent authorities shall, within two working days of granting authorisation, communicate to ESMA the information specified in Article 109(5). Competent authorities shall also inform ESMA of any refusals of authorisations. ESMA shall make the information referred to in Article 109(5) available in the register referred to in that Article by the starting date of the provision of crypto-asset services.

Article 64

Withdrawal of authorisation of a crypto-asset service provider

Competent authorities shall withdraw the authorisation of a crypto-asset service provider if the crypto-asset service provider does any of the following:

(a) has not used its authorisation within 12 months of the date of the authorisation;

(b) has expressly renounced its authorisation;

(d) has obtained its authorisation by irregular means, such as by making false statements in its application for authorisation;

(e) no longer meets the conditions under which the authorisation was granted and has not taken the remedial action requested by the competent authority within the specified timeframe;

(f) fails to have in place effective systems, procedures and arrangements to detect and prevent money laundering and terrorist financing in accordance with Directive (EU) 2015/849;

(g) has seriously infringed this Regulation, including the provisions relating to the protection of holders of crypto-assets or of clients of crypto-asset service providers, or market integrity.

Competent authorities may withdraw authorisation as a crypto-asset service provider in any of the following situations:

(a) the crypto-asset service provider has infringed the provisions of national law transposing Directive (EU) 2015/849;

(b) the crypto-asset service provider has lost its authorisation as a payment institution or its authorisation as an electronic money institution, and that crypto-asset service provider has failed to remedy the situation within 40 calendar days.

Where a competent authority withdraws an authorisation as a crypto-asset service provider, it shall notify ESMA and the single points of contact of the host Member States without undue delay. ESMA shall make such information available in the register referred to in Article 109.

Competent authorities may limit the withdrawal of authorisation to a particular crypto-asset service.

Before withdrawing an authorisation as a crypto-asset service provider, competent authorities shall consult the competent authority of another Member State where the crypto-asset service provider concerned is:

(a) a subsidiary of a crypto-asset service provider authorised in that other Member State;

(b) a subsidiary of the parent undertaking of a crypto-asset service provider authorised in that other Member State;

(c) controlled by the same natural or legal persons who control a crypto-asset service provider authorised in that other Member State.

Before withdrawing an authorisation as a crypto-asset service provider, competent authorities may consult the authority competent for supervising compliance of the crypto-asset service provider with the rules on anti-money laundering and counter-terrorist financing.

EBA, ESMA and any competent authority of a host Member State may at any time request that the competent authority of the home Member State examine whether the crypto-asset service provider still complies with the conditions under which the authorisation was granted, when there are grounds to suspect it may no longer be the case.

Crypto-asset service providers shall establish, implement and maintain adequate procedures ensuring the timely and orderly transfer of their clients’ crypto-assets and funds to another crypto-asset service provider when an authorisation is withdrawn.

Article 65

Cross-border provision of crypto-asset services

A crypto-asset service provider that intends to provide crypto-asset services in more than one Member State shall submit the following information to the competent authority of the home Member State:

(a) a list of the Member States in which the crypto-asset service provider intends to provide crypto-asset services;

(b) the crypto-asset services that the crypto-asset service provider intends to provide on a cross-border basis;

(d) a list of all other activities provided by the crypto-asset service provider not covered by this Regulation.

The competent authority of the home Member State shall, within 10 working days of receipt of the information referred to in paragraph 1, communicate that information to the single points of contact of the host Member States, to ESMA and to EBA.

The competent authority of the Member State that granted authorisation shall inform the crypto-asset service provider concerned of the communication referred to in paragraph 2 without delay.

The crypto-asset service provider may begin to provide crypto-asset services in a Member State other than its home Member State from the date of receipt of the communication referred to in paragraph 3 or at the latest from the 15th calendar day after having submitted the information referred to in paragraph 1.

CHAPTER 2 Obligations for all crypto-asset service providers

Article 66

Obligation to act honestly, fairly and professionally in the best interests of clients

Crypto-asset service providers shall act honestly, fairly and professionally in accordance with the best interests of their clients and prospective clients.

Crypto-asset service providers shall provide their clients with information that is fair, clear and not misleading, including in marketing communications, which shall be identified as such. Crypto-asset service providers shall not, deliberately or negligently, mislead a client in relation to the real or perceived advantages of any crypto-assets.

Crypto-asset service providers shall warn clients of the risks associated with transactions in crypto-assets.

When operating a trading platform for crypto-assets, exchanging crypto-assets for funds or other crypto-assets, providing advice on crypto-assets or providing portfolio management on crypto-assets, crypto-asset service providers shall provide their clients with hyperlinks to any crypto-asset white papers for the crypto-assets in relation to which they are providing those services.

Crypto-asset service providers shall make their policies on pricing, costs and fees publicly available, in a prominent place on their website.

Crypto-asset service providers shall make publicly available, in a prominent place on their website, information related to the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanism used to issue each crypto-asset in relation to which they provide services. That information may be obtained from the crypto-asset white papers.

ESMA, in cooperation with EBA, shall develop draft regulatory technical standards on the content, methodologies and presentation of information referred to in paragraph 5 in respect of the sustainability indicators in relation to adverse impacts on the climate and other environment‐related adverse impacts.

When developing the draft regulatory technical standards referred to in the first subparagraph, ESMA shall consider the various types of consensus mechanisms used to validate crypto-asset transactions, their incentive structures and the use of energy, renewable energy and natural resources, the production of waste and greenhouse gas emissions. ESMA shall update the regulatory technical standards in the light of regulatory and technological developments.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Article 67

Prudential requirements

Crypto-asset service providers shall, at all times, have in place prudential safeguards equal to an amount of at least the higher of the following:

(a) the amount of permanent minimum capital requirements indicated in Annex IV, depending on the type of the crypto-asset services provided;

(b) one quarter of the fixed overheads of the preceding year, reviewed annually.

Crypto-asset service providers that have not been in business for one year from the date on which they began providing services shall use, for the calculation referred to in paragraph 1, point (b), the projected fixed overheads included in their projections for the first 12 months of service provision, as submitted with their application for authorisation.

For the purposes of paragraph 1, point (b), crypto-asset service providers shall calculate their fixed overheads for the preceding year, using figures resulting from the applicable accounting framework, by subtracting the following items from the total expenses after distribution of profits to shareholders or members in their most recently audited annual financial statements or, where audited statements are not available, in annual financial statements validated by national supervisors:

(a) staff bonuses and other remuneration, to the extent that those bonuses and that remuneration depend on a net profit of the crypto-asset service providers in the relevant year;

(b) employees’, directors’ and partners’ shares in profits;

(d) non-recurring expenses from non-ordinary activities.

The prudential safeguards referred to in paragraph 1 shall take any of the following forms or a combination thereof:

(a) own funds, consisting of Common Equity Tier 1 items and instruments referred to in Articles 26 to 30 of Regulation (EU) No 575/2013 after the deductions in full, pursuant to Article 36 of that Regulation, without the application of threshold exemptions pursuant to Articles 46 and 48 of that Regulation;

(b) an insurance policy covering the territories of the Union where crypto-asset services are provided or a comparable guarantee.

The insurance policy referred to in paragraph 4, point (b), shall be disclosed to the public on the crypto-asset service provider’s website and shall have at least the following characteristics:

(a) it has an initial term of not less than one year;

(b) the notice period for its cancellation is at least 90 days;

(d) it is provided by a third-party entity.

The insurance policy referred to in paragraph 4, point (b), shall include coverage against the risk of all of the following:

(a) loss of documents;

(b) misrepresentations or misleading statements made;

(c) acts, errors or omissions resulting in a breach of:
(i) legal and regulatory obligations;
(ii) the obligation to act honestly, fairly and professionally towards clients;
(iii) obligations of confidentiality;

(d) failure to establish, implement and maintain appropriate procedures to prevent conflicts of interest;

(e) losses arising from business disruption or system failures;

(f) where applicable to the business model, gross negligence in the safeguarding of clients’ crypto-assets and funds;

(g) liability of the crypto-asset service providers towards clients pursuant to Article 75(8).

Article 68

Governance arrangements

Members of the management body of crypto-asset service providers shall be of sufficiently good repute and possess the appropriate knowledge, skills and experience, both individually and collectively, to perform their duties. In particular, members of the management body of crypto-asset service providers shall not have been convicted of offences relating to money laundering or terrorist financing or of any other offences that would affect their good repute. They shall also demonstrate that they are capable of committing sufficient time to effectively perform their duties.

Shareholders and members, whether direct or indirect, that have qualifying holdings in crypto-asset service providers shall be of sufficiently good repute and, in particular, shall not have been convicted of offences relating to money laundering or terrorist financing or of any other offences that would affect their good repute.

Where the influence exercised by the shareholders or members, whether direct or indirect, that have qualifying holdings in a crypto-asset service provider is likely to be prejudicial to the sound and prudent management of that crypto-asset service provider, competent authorities shall take appropriate measures to address those risks.

Such measures may include applications for judicial orders or the imposition of penalties against directors and those responsible for management, or the suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members, whether direct or indirect, that have the qualifying holdings.

Crypto-asset service providers shall adopt policies and procedures that are sufficiently effective to ensure compliance with this Regulation.

Crypto-asset service providers shall employ personnel with the knowledge, skills and expertise necessary for the discharge of the responsibilities allocated to them, taking into account the scale, nature and range of crypto-asset services provided.

The management body of crypto-asset service providers shall assess and periodically review the effectiveness of the policy arrangements and procedures put in place to comply with Chapters 2 and 3 of this Title and take appropriate measures to address any deficiencies in that respect.

Crypto-asset service providers shall take all reasonable steps to ensure continuity and regularity in the performance of their crypto-asset services. To that end, crypto-asset service providers shall employ appropriate and proportionate resources and procedures, including resilient and secure ICT systems as required by Regulation (EU) 2022/2554.

Crypto-asset service providers shall establish a business continuity policy, which shall include ICT business continuity plans as well as ICT response and recovery plans set up pursuant to Articles 11 and 12 of Regulation (EU) 2022/2554 that aim to ensure, in the case of an interruption to their ICT systems and procedures, the preservation of essential data and functions and the maintenance of crypto-asset services or, where that is not possible, the timely recovery of such data and functions and the timely resumption of crypto-asset services.

Crypto-asset service providers shall have in place mechanisms, systems and procedures as required by Regulation (EU) 2022/2554, as well as effective procedures and arrangements for risk assessment, to comply with the provisions of national law transposing Directive (EU) 2015/849. They shall monitor and, on a regular basis, evaluate the adequacy and effectiveness of those mechanisms, systems and procedures, taking into account the scale, the nature and range of crypto-asset services provided, and shall take appropriate measures to address any deficiencies in that respect.

Crypto-asset service providers shall have systems and procedures to safeguard the availability, authenticity, integrity and confidentiality of data pursuant to Regulation (EU) 2022/2554.

Crypto-asset service providers shall arrange for records to be kept of all crypto-asset services, activities, orders, and transactions undertaken by them. Those records shall be sufficient to enable competent authorities to fulfil their supervisory tasks and to take enforcement measures, and in particular to ascertain whether crypto-asset service providers have complied with all obligations including those with respect to clients or prospective clients and to the integrity of the market.

The records kept pursuant to the first subparagraph shall be provided to clients upon request and shall be kept for a period of five years and, where requested by the competent authority before five years have elapsed, for a period of up to seven years.

10.

ESMA shall develop draft regulatory technical standards to further specify:

(a) the measures ensuring continuity and regularity in the performance of the crypto-asset services referred to in paragraph 7;

(b) the records to be kept of all crypto-asset services, activities, orders and transactions undertaken referred to in paragraph 9.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Article 69

Information to competent authorities

Crypto-asset service providers shall notify their competent authority without delay of any changes to their management body, prior to the exercise of activities by any new members, and shall provide their competent authority with all of the necessary information to assess compliance with Article 68.

Article 70

Safekeeping of clients’ crypto-assets and funds

Crypto-asset service providers that hold crypto-assets belonging to clients or the means of access to such crypto-assets shall make adequate arrangements to safeguard the ownership rights of clients, especially in the event of the crypto-asset service provider’s insolvency, and to prevent the use of clients’ crypto-assets for their own account.

Where their business models or the crypto-asset services require holding clients’ funds other than e-money tokens, crypto-asset service providers shall have adequate arrangements in place to safeguard the ownership rights of clients and prevent the use of clients’ funds for their own account.

Crypto-asset service providers shall, by the end of the business day following the day on which clients’ funds other than e-money tokens were received, place those funds with a credit institution or a central bank.

Crypto-asset service providers shall take all necessary steps to ensure that clients’ funds other than e-money tokens held with a credit institution or a central bank are held in an account separately identifiable from any accounts used to hold funds belonging to the crypto-asset service providers.

Crypto-asset service providers may themselves, or through a third party, provide payment services related to the crypto-asset service they offer provided that the crypto-asset service provider itself, or the third party, is authorised to provide those services under Directive (EU) 2015/2366.

Where payment services are provided, crypto-asset service providers shall inform their clients of all of the following:

(a) the nature and terms and conditions of those services, including references to the applicable national law and to the rights of clients;

(b) whether those services are provided by them directly or by a third party.

Paragraphs 2 and 3 of this Article shall not apply to crypto-asset service providers that are electronic money institutions, payment institutions or credit institutions.

Article 71

Complaints-handling procedures

Crypto-asset service providers shall establish and maintain effective and transparent procedures for the prompt, fair and consistent handling of complaints received from clients and shall publish descriptions of those procedures.

Clients shall be able to file complaints free of charge with crypto-asset service providers.

Crypto-asset service providers shall inform clients of the possibility of filing a complaint. Crypto-asset service providers shall make available to clients a template for filing complaints and shall keep a record of all complaints received and any measures taken in response thereto.

Crypto-asset service providers shall investigate all complaints in a timely and fair manner and communicate the outcome of such investigations to their clients within a reasonable period.

ESMA, in close cooperation with EBA, shall develop draft regulatory technical standards to further specify the requirements, templates and procedures for handling complaints.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Article 72

Identification, prevention, management and disclosure of conflicts of interest

Crypto-asset service providers shall implement and maintain effective policies and procedures, taking into account the scale, the nature and range of crypto-asset services provided, to identify, prevent, manage and disclose conflicts of interest between:

(a) themselves and:
(i) their shareholders or members;
(ii) any person directly or indirectly linked to the crypto-asset service providers or their shareholders or members by control;
(iii) members of their management body;
(iv) their employees; or
(v) their clients; or

(b) two or more clients whose mutual interests conflict.

Crypto-asset service providers shall, in a prominent place on their website, disclose to their clients and prospective clients the general nature and sources of conflicts of interest referred to in paragraph 1 and the steps taken to mitigate them.

The disclosure referred to in paragraph 2 shall be made in an electronic format and shall include sufficient detail, taking into account the nature of each client, in order to enable each client to take an informed decision about the crypto-asset service in the context of which the conflicts of interest arise.

Crypto-asset service providers shall assess and, at least annually, review their policy on conflicts of interest and take all appropriate measures to address any deficiencies in that respect.

ESMA, in close cooperation with EBA, shall develop draft regulatory technical standards to further specify:

(a) the requirements for the policies and procedures referred to in paragraph 1, taking into account the scale, the nature and the range of crypto-asset services provided;

(b) the details and methodology for the content of the disclosure referred to in paragraph 2.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Article 73

Outsourcing

Crypto-asset service providers that outsource services or activities to third parties for the performance of operational functions shall take all reasonable steps to avoid additional operational risk. They shall remain fully responsible for discharging all of their obligations pursuant to this Title and shall ensure at all times that the following conditions are met:

(a) outsourcing does not result in the delegation of the responsibility of the crypto-asset service providers;

(b) outsourcing does not alter the relationship between the crypto-asset service providers and their clients, nor the obligations of the crypto-asset service providers towards their clients;

(d) third parties involved in the outsourcing cooperate with the competent authority of the crypto-asset service providers’ home Member State and the outsourcing does not prevent the exercise of the supervisory functions of competent authorities, including on-site access to acquire any relevant information needed to fulfil those functions;

(e) crypto-asset service providers retain the expertise and resources necessary for evaluating the quality of the services provided, for supervising the outsourced services effectively and for managing the risks associated with the outsourcing on an ongoing basis;

(f) crypto-asset service providers have direct access to the relevant information of the outsourced services;

(g) crypto-asset service providers ensure that third parties involved in the outsourcing meet the data protection standards of the Union.

For the purposes of point (g) of the first subparagraph, crypto-asset service providers are responsible for ensuring that the data protection standards are set out in the written agreements referred to in paragraph 3.

Crypto-asset service providers shall have a policy on their outsourcing, including on contingency plans and exit strategies, taking into account the scale, the nature and the range of crypto-asset services provided.

Crypto-asset service providers shall define in a written agreement their rights and obligations and those of the third parties to which they are outsourcing services or activities. Outsourcing agreements shall give crypto-asset service providers the right to terminate those agreements.

Crypto-asset service providers and third parties shall, upon request, make available to the competent authorities and other relevant authorities all information necessary to enable those authorities to assess compliance of the outsourced activities with the requirements of this Title.

Article 74

Orderly wind-down of crypto-asset service providers

Crypto-asset service providers that provide the services referred to in Articles 75 to 79 shall have in place a plan that is appropriate to support an orderly wind-down of their activities under applicable national law, including the continuity or recovery of any critical activities performed by those service providers. That plan shall demonstrate the ability of crypto-asset service providers to carry out an orderly wind-down without causing undue economic harm to their clients.

CHAPTER 3 Obligations in respect of specific crypto-asset services

Article 75

Providing custody and administration of crypto-assets on behalf of clients

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall conclude an agreement with their clients to specify their duties and their responsibilities. Such an agreement shall include at least the following:

(a) the identity of the parties to the agreement;

(b) the nature of the crypto-asset service provided and a description of that service;

(d) the means of communication between the crypto-asset service provider and the client, including the client’s authentication system;

(e) a description of the security systems used by the crypto-asset service provider;

(f) the fees, costs and charges applied by the crypto-asset service provider;

(g) the applicable law.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall keep a register of positions, opened in the name of each client, corresponding to each client’s rights to the crypto-assets. Where relevant, crypto-asset service providers shall record as soon as possible in that register any movements following instructions from their clients. In such cases, their internal procedures shall ensure that any movement affecting the registration of the crypto-assets is evidenced by a transaction regularly registered in the client’s register of positions.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall establish a custody policy with internal rules and procedures to ensure the safekeeping or the control of such crypto-assets, or the means of access to the crypto-assets.

The custody policy referred to in the first subparagraph shall minimise the risk of a loss of clients’ crypto-assets or the rights related to those crypto-assets or the means of access to the crypto-assets due to fraud, cyber threats or negligence.

A summary of the custody policy shall be made available to clients at their request in an electronic format.

Where applicable, crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall facilitate the exercise of the rights attached to the crypto-assets. Any event likely to create or modify the rights of a client shall immediately be recorded in the client’s register of positions.

Where there are changes to the underlying distributed ledger technology or any other event likely to create or modify a client’s rights, the client shall be entitled to any crypto-assets or any rights newly created on the basis and to the extent of the client’s positions at the time of the occurrence of that change or event, except when a valid agreement signed with the crypto-asset service provider providing custody and administration of crypto-assets on behalf of clients pursuant to paragraph 1 prior to that change or event expressly provides otherwise.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall provide their clients, at least once every three months and at the request of the client concerned, with a statement of position of the crypto-assets recorded in the name of those clients. That statement of position shall be made in an electronic format. The statement of position shall identify the crypto-assets concerned, their balance, their value and the transfer of crypto-assets made during the period concerned.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall provide their clients as soon as possible with any information about operations on crypto-assets that require a response from those clients.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall ensure that necessary procedures are in place to return crypto-assets held on behalf of their clients, or the means of access, as soon as possible to those clients.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall segregate holdings of crypto-assets on behalf of their clients from their own holdings and ensure that the means of access to crypto-assets of their clients is clearly identified as such. They shall ensure that, on the distributed ledger, their clients’ crypto-assets are held separately from their own crypto-assets.

The crypto-assets held in custody shall be legally segregated from the crypto-asset service provider’s estate in the interest of the clients of the crypto-asset service provider in accordance with applicable law, so that creditors of the crypto-asset service provider have no recourse to crypto-assets held in custody by the crypto-asset service provider, in particular in the event of insolvency.

Crypto-asset service provider shall ensure that the crypto-assets held in custody are operationally segregated from the crypto-asset service provider’s estate.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients shall be liable to their clients for the loss of any crypto-assets or of the means of access to the crypto-assets as a result of an incident that is attributable to them. The liability of the crypto-asset service provider shall be capped at the market value of the crypto-asset that was lost, at the time the loss occurred.

Incidents not attributable to the crypto-asset service provider include any event in respect of which the crypto-asset service provider demonstrates that it occurred independently of the provision of the relevant service, or independently of the operations of the crypto-asset service provider, such as a problem inherent in the operation of the distributed ledger that the crypto-asset service provider does not control.

If crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients make use of other crypto-asset service providers of that service, they shall only make use of crypto-asset service providers authorised in accordance with Article 59.

Crypto-asset service providers providing custody and administration of crypto-assets on behalf of clients and that make use of other crypto-asset service providers of that service shall inform their clients thereof.

Article 76

Operation of a trading platform for crypto-assets

Crypto-asset service providers operating a trading platform for crypto-assets shall lay down, maintain and implement clear and transparent operating rules for the trading platform. Those operating rules shall at least:

(a) set the approval processes, including customer due diligence requirements commensurate to the money laundering or terrorist financing risk presented by the applicant in accordance with Directive (EU) 2015/849, that are applied before admitting crypto-assets to the trading platform;

(b) define exclusion categories, if any, of the types of crypto-assets that are not admitted to trading;

(d) set objective, non-discriminatory rules and proportionate criteria for participation in the trading activities, which promote fair and open access to the trading platform for clients willing to trade;

(e) set non-discretionary rules and procedures to ensure fair and orderly trading and objective criteria for the efficient execution of orders;

(f) set conditions for crypto-assets to remain accessible for trading, including liquidity thresholds and periodic disclosure requirements;

(g) set conditions under which trading of crypto-assets can be suspended;

(h) set procedures to ensure efficient settlement of both crypto-assets and funds.

For the purposes of point (a) of the first subparagraph, the operating rules shall clearly state that a crypto-asset is not to be admitted to trading where no corresponding crypto-asset white paper has been published in the cases required by this Regulation.

Before admitting a crypto-asset to trading, crypto-asset service providers operating a trading platform for crypto-assets shall ensure that the crypto-asset complies with the operating rules of the trading platform and shall assess the suitability of the crypto-asset concerned. When assessing the suitability of a crypto-asset, the crypto-asset service providers operating a trading platform shall evaluate, in particular, the reliability of the technical solutions used and the potential association to illicit or fraudulent activities, taking into account the experience, track record and reputation of the issuer of those crypto-assets and its development team. The crypto-asset service providers operating a trading platform shall also assess the suitability of the crypto-assets other than asset-referenced tokens or e-money tokens referred to in Article 4(3), first subparagraph, points (a) to (d).

The operating rules of the trading platform for crypto-assets shall prevent the admission to trading of crypto-assets that have an inbuilt anonymisation function unless the holders of those crypto-assets and their transaction history can be identified by the crypto-asset service providers operating a trading platform for crypto-assets.

The operating rules referred to in paragraph 1 shall be drawn up in an official language of the home Member State, or in a language customary in the sphere of international finance.

If the operation of a trading platform for crypto-assets is provided in another Member State, the operating rules referred to in paragraph 1 shall be drawn up in an official language of the host Member State, or in a language customary in the sphere of international finance.

Crypto-asset service providers operating a trading platform for crypto-assets shall not deal on own account on the trading platform for crypto-assets they operate, including where they provide the exchange of crypto-assets for funds or other crypto-assets.

Crypto-asset service providers operating a trading platform for crypto-assets shall only be allowed to engage in matched principal trading where the client has consented to that process. Crypto-asset service providers shall provide the competent authority with information explaining their use of matched principal trading. The competent authority shall monitor the engagement of crypto-asset service providers in matched principal trading, and ensure that their engagement in matched principal trading continues to fall within the definition of such trading and does not give rise to conflicts of interest between the crypto-asset service providers and their clients.

Crypto-asset service providers operating a trading platform for crypto-assets shall have in place effective systems, procedures and arrangements to ensure that their trading systems:

(a) are resilient;

(b) have sufficient capacity to deal with peak order and message volumes;

(d) are able to reject orders that exceed pre-determined volume and price thresholds or are clearly erroneous;

(e) are fully tested to ensure that the conditions under points (a) to (d) are met;

(f) are subject to effective business continuity arrangements to ensure the continuity of their services if there is any failure of the trading system;

(g) are able to prevent or detect market abuse;

(h) are sufficiently robust to prevent their abuse for the purposes of money laundering or terrorist financing.

Crypto-asset service providers operating a trading platform for crypto-assets shall inform their competent authority when they identify cases of market abuse or attempted market abuse occurring on or through their trading systems.

Crypto-asset service providers operating a trading platform for crypto-assets shall make public any bid and ask prices and the depth of trading interests at those prices which are advertised for crypto-assets through their trading platforms. The crypto-asset service providers concerned shall make that information available to the public on a continuous basis during trading hours.

10.

Crypto-asset service providers operating a trading platform for crypto-assets shall make public the price, volume and time of the transactions executed in respect of crypto-assets traded on their trading platforms. They shall make those details for all such transactions public as close to real-time as is technically possible.

11.

Crypto-asset service providers operating a trading platform for crypto-assets shall make the information published in accordance with paragraphs 9 and 10 available to the public on a reasonable commercial basis and ensure non-discriminatory access to that information. That information shall be made available free of charge 15 minutes after publication in a machine-readable format and it shall remain published for at least two years.

12.

Crypto-asset service providers operating a trading platform for crypto-assets shall initiate the final settlement of a crypto-asset transaction on the distributed ledger within 24 hours of the transaction being executed on the trading platform or, in the case of transactions settled outside the distributed ledger, by the closing of the day at the latest.

13.

Crypto-asset service providers operating a trading platform for crypto-assets shall ensure that their fee structures are transparent, fair and non-discriminatory and that they do not create incentives to place, modify or cancel orders or to execute transactions in a way that contributes to disorderly trading conditions or market abuse as referred to in Title VI.

14.

Crypto-asset service providers operating a trading platform for crypto-assets shall maintain resources and have back-up facilities in place to enable them to report to their competent authority at all times.

15.

Crypto-asset service providers operating a trading platform shall keep at the disposal of the competent authority, for at least five years, the relevant data relating to all orders in crypto-assets that are advertised through their systems, or give the competent authority access to the order book so that the competent authority is able to monitor the trading activity. That relevant data shall contain the characteristics of the order, including those that link an order with the executed transactions that stem from that order.

16.

ESMA shall develop draft regulatory technical standards to further specify:

(a) the manner in which transparency data, including the level of disaggregation of the data to be made available to the public as referred to in paragraphs 1, 9 and 10, is to be presented;

(b) the content and format of order book records to be maintained as specified in paragraph 15.

ESMA shall submit the draft regulatory technical standards referred to in the first subparagraph to the Commission by 30 June 2024.

Article 77

Exchange of crypto-assets for funds or other crypto-assets

Crypto-asset service providers exchanging crypto-assets for funds or other crypto-assets shall establish a non-discriminatory commercial policy that indicates, in particular, the type of clients they agree to transact with and the conditions that shall be met by such clients.

Crypto-asset service providers exchanging crypto-assets for funds or other crypto-assets shall publish a firm price of the crypto-assets or a method for determining the price of the crypto-assets that they propose to exchange for funds or other crypto-assets, and any applicable limit determined by that crypto-asset service provider on the amount to be exchanged.

Crypto-asset service providers exchanging crypto-assets for funds or other crypto-assets shall execute client orders at the prices displayed at the time when the order for exchange is final. Crypto-asset service providers shall inform their clients of the conditions for their order to be deemed final.

Crypto-asset service providers exchanging crypto-assets for funds or other crypto-assets shall publish information about the transactions concluded by them, such as transaction volumes and prices.

Article 78

Execution of orders for crypto-assets on behalf of clients

Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall take all necessary steps to obtain, while executing orders, the best possible result for their clients taking into account factors of price, costs, speed, likelihood of execution and settlement, size, nature, conditions of custody of the crypto-assets or any other consideration relevant to the execution of the order.

Notwithstanding the first subparagraph, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall not be required to take the necessary steps as referred to in the first subparagraph in cases where they execute orders for crypto-assets following specific instructions given by its clients.

To ensure compliance with paragraph 1, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall establish and implement effective execution arrangements. In particular, they shall establish and implement an order execution policy to allow them to comply with paragraph 1. The order execution policy shall, amongst others, provide for the prompt, fair and expeditious execution of client orders and prevent the misuse by the crypto-asset service providers’ employees of any information relating to client orders.

Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall provide appropriate and clear information to their clients on their order execution policy referred to in paragraph 2 and any significant change thereto. That information shall explain clearly, in sufficient detail and in a way that can be easily understood by clients, how client orders are to be executed by crypto-asset service providers. Crypto-asset service providers shall obtain prior consent from each client regarding the order execution policy.

Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall be able to demonstrate to their clients, at their request, that they have executed their orders in accordance with their order execution policy and shall be able to demonstrate to the competent authority, at the latter’s request, their compliance with this Article.

Where the order execution policy provides for the possibility that client orders might be executed outside a trading platform, crypto-asset service providers executing orders for crypto-assets on behalf of clients shall inform their clients about that possibility and shall obtain the prior express consent of their clients before proceeding to execute their orders outside a trading platform, either in the form of a general agreement or with respect to individual transactions.

Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall monitor the effectiveness of their order execution arrangements and order execution policy in order to identify and, where appropriate, correct any deficiencies in that respect. In particular, they shall assess, on a regular basis, whether the execution venues included in the order execution policy provide for the best possible result for clients or whether they need to make changes to their order execution arrangements. Crypto-asset service providers executing orders for crypto-assets on behalf of clients shall notify clients with whom they have an ongoing client relationship of any material changes to their order execution arrangements or order execution policy.

Article 79

Placing of crypto-assets

Crypto-asset service providers placing crypto-assets shall communicate the following information to the offeror, to the person seeking admission to trading, or to any third party acting on their behalf, before entering into an agreement with them:

(a) the type of placement under consideration, including whether a minimum amount of purchase is guaranteed or not;

(b) an indication of the amount of transaction fees associated with the proposed placing;

(d) information about the targeted purchasers.

Crypto-asset service providers placing crypto-assets shall, before placing those crypto-assets, obtain the agreement of the issuers of those crypto-assets or any third party acting on their behalf as regards the information listed in the first subparagraph.

Crypto-asset service providers’ rules on conflicts of interest referred to in Article 72(1) shall have specific and adequate procedures in place to identify, prevent, manage and disclose any conflicts of interest arising from the following situations:

(a) crypto-asset service providers place the crypto-assets with their own clients;

(b) the proposed price for placing of crypto-assets has been overestimated or underestimated;

Article 80

Reception and transmission of orders for crypto-assets on behalf of clients

Crypto-asset service providers receiving and transmitting orders for crypto-assets on behalf of clients shall establish and implement procedures and arrangements that provide for the prompt and proper transmission of client orders for execution on a trading platform for crypto-assets or to another crypto-asset service provider.

Crypto-asset service providers receiving and transmitting orders for crypto-assets on behalf of clients shall not receive any remuneration, discount or non-monetary benefit in return for routing orders received from clients to a particular trading platform for crypto-assets or to another crypto-asset service provider.

Crypto-asset service providers receiving and transmitting orders for crypto-assets on behalf of clients shall not misuse information relating to pending client orders, and shall take all reasonable steps to prevent the misuse of such information by any of their employees.

Article 81

Providing advice on crypto-assets and providing portfolio management of crypto-assets

Crypto-asset service providers providing advice on crypto-assets or providing portfolio management of crypto-assets shall assess whether the crypto-asset services or crypto-assets are suitable for their clients or prospective clients, taking into consideration their knowledge and experience in investing in crypto-assets, their investment objectives, including risk tolerance, and their financial situation including their ability to bear losses.

Crypto-asset service providers providing advice on crypto-assets shall, in good time before providing advice on crypto-assets, inform prospective clients whether the advice is:

(a) provided on an independent basis;

(b) based on a broad or on a more restricted analysis of different crypto-assets, including whether the advice is limited to crypto-assets issued or offered by entities having close links with the crypto-asset service provider or any other legal or economic relationships, such as contractual relationships, that risk impairing the independence of the advice provided.

Where a crypto-asset service provider providing advice on crypto-assets informs the prospective client that advice is provided on an independent basis, it shall:

(a) assess a sufficient range of crypto-assets available on the market which must be sufficiently diverse to ensure that the client’s investment objectives can be suitably met and which must not be limited to crypto-assets issued or provided by:
(i) that same crypto-asset service provider;
(ii) entities having close links with that same crypto-asset service provider; or
(iii) other entities with which that same crypto-asset service provider has such close legal or economic relationships, such as contractual relationships, as to pose a risk of impairing the independent basis of the advice provided;

(b) not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by any third party or a person acting on behalf of a third party in relation to the provision of the service to clients.

Notwithstanding point (b) of the first subparagraph, minor non-monetary benefits that are capable of enhancing the quality of crypto-asset services provided to a client and that are of such a scale and nature that they do not impair compliance with a crypto-asset service provider’s obligation to act in the best interests of its client shall be permitted in cases where they are clearly disclosed to the client.

Crypto-asset service providers providing advice on crypto-assets shall also provide prospective clients with information on all costs and related charges, including the cost of advice, where applicable, the cost of crypto-assets recommended or marketed to the client and how the client is permitted to pay for the crypto-assets, also encompassing any third-party payments.

Crypto-asset service providers providing portfolio management of crypto-assets shall not accept and retain fees, commissions or any monetary or non-monetary benefits paid or provided by an issuer, offeror, person seeking admission to trading, or any third party, or a person acting on behalf of a third party, in relation to the provision of portfolio management of crypto-assets to their clients.

Where a crypto-asset service provider informs a prospective client that its advice is provided on a non-independent basis, that provider may receive inducements subject to the conditions that the payment or benefit:

(a) is designed to enhance the quality of the relevant service to the client; and

(b) does not impair compliance with the crypto-asset service provider’s obligation to act honestly, fairly and professionally in accordance with the best interests of its clients.

The existence, nature and amount of the payment or benefit referred to in paragraph 4, or, where the amount cannot be ascertained, the method of calculating that amount, shall be clearly disclosed to the client, in a manner that is comprehensive, accurate and understandable, prior to the provision of the relevant crypto-asset service.

Crypto-asset service providers providing advice on crypto-assets shall ensure that natural persons giving advice or information about crypto-assets, or a crypto-asset service, on their behalf possess the necessary knowledge and competence to fulfil their obligations. Member States shall publish the criteria to be used for assessing such knowledge and competence.

For the purposes of the suitability assessment referred to in paragraph 1, crypto-asset service providers providing advice on crypto-assets or providing portfolio management of crypto-assets shall obtain from their clients or prospective clients the necessary information regarding their knowledge of, and experience in, investing, including in crypto-assets, their investment objectives, including risk tolerance, their financial situation including their ability to bear losses, and their basic understanding of the risks involved in purchasing crypto-assets, so as to enable crypto-asset service providers to recommend to clients or prospective clients whether or not the crypto-assets are suitable for them and, in particular, are in accordance with their risk tolerance and ability to bear losses.

Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall warn clients or prospective clients that:

(a) the value of crypto-assets might fluctuate;

(b) the crypto-assets might be subject to full or partial losses;

(d) where applicable, the crypto-assets are not covered by the investor compensation schemes under Directive 97/9/EC;

(e) the crypto-assets are not covered by the deposit guarantee schemes under Directive 2014/49/EU.

10.

Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall establish, maintain and implement policies and procedures to enable them to collect and assess all information necessary to conduct the assessment referred to in paragraph 1 for each client. They shall take all reasonable steps to ensure that the information collected about their clients or prospective clients is reliable.

11.

Where clients do not provide the information required pursuant to paragraph 8, or where crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets consider that the crypto-asset services or crypto-assets are not suitable for their clients, they shall not recommend such crypto-asset services or crypto-assets, nor begin the provision of portfolio management of such crypto-assets.

12.

Crypto-asset service providers providing advice on crypto-assets or portfolio management of crypto-assets shall regularly review for each client the suitability assessment referred to in paragraph 1 at least every two years after the initial assessment made in accordance with that paragraph.

13.

Once the suitability assessment referred to in paragraph 1 or its review under paragraph 12 has been performed, crypto-asset service providers providing advice on crypto-assets shall provide clients with a report on suitability specifying the advice given and how that advice meets the preferences, objectives and other characteristics of clients. That report shall be made and communicated to clients in an electronic format. That report shall, as a minimum:

(a) include an updated information on the assessment referred to in paragraph 1; and

(b) provide an outline of the advice given.

The report on suitability referred to in the first subparagraph shall make clear that the advice is based on the client’s knowledge and experience in investing in crypto-assets, the client’s investment objectives, risk tolerance, financial situation and ability to bear losses.

14.

Crypto-asset service providers providing portfolio management of crypto-assets shall provide periodic statements to their clients, in an electronic format, of the portfolio management activities carried out on their behalf. Those periodic statements shall contain a fair and balanced review of the activities undertaken and of the performance of the portfolio during the reporting period, an updated statement of how the activities undertaken meet the preferences, objectives and other characteristics of the client, as well as an updated information on the suitability assessment referred to in paragraph 1 or its review under paragraph 12.

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