Entities offering Crypto Derivatives may fall under special rules: ESMA.
The European Securities and Markets Authority (ESMA), the regulator and regulator of financial markets in the European Union, has issued a notice to remind investors to review investment vehicles that offer exposure to cryptocurrencies.
In Tuesday's notice, ESMA said that derivatives linked to cryptocurrencies such as Bitcoin (BTC) or Ether (ETH), including those marketed as “perpetual futures or perpetual contracts”, may fall within the scope of the intervention measures applied to contracts for difference or CFDs. The EU authority warned companies to “take appropriate measures to identify, prevent or manage conflicts of interest arising from the supply of these products”.
“When these derivatives meet the definition of a CFD, they are subject to the relevant product intervention requirements, including consumption limits, mandatory risk warnings, profit closing and negative balance protection, and the prohibition of monetary and non-monetary benefits,” ESMA said.
In 2011, the European Union Agency for Monitoring Compliance with Regional Markets in the Framework of the Crypto-Assets Regulation (MiCA) was established in 2011 as a supervisory body for the protection of investors in financial markets. ESMA has issued similar warnings to entities linked to digital assets, including a January publication of financial influencers promoting “volatile cryptocurrencies.”
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Bill Hughes, senior consultant and director of global regulatory affairs at Consensys, responded to the XMA announcement.
“[T]European authorities have made it clear that they are closely monitoring the used crypto-derivatives space. Labeling the product as ‘Eternal Futures' is not exempt from CFD restrictions if the properties match the definition. […] Firms offering leveraged derivatives to retail customers in the EU will need to revisit their product analysis, distribution strategy and governance frameworks – or EU regulators will.
Kraken announces “Eternal Futures” product amid ESMA announcement
While not specifically targeting EU markets under MiCA, Kraken said on Tuesday it has listed tokenized versions of fixed-term futures tracking “major equity indices, gold-backed ETFs and major public companies”.
The products are available to residents of more than 110 countries outside the US. However, a Kraken spokesperson told Cointelegraph that the product “will not be available to EU customers at launch.”
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