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ESMA Shift Focus on Digital Assets

ESMA Shift Focus on Digital Assets

Following the US Securities and Exchange Commission (US SEC), the European financial regulator announces its focus on digital assets this year. The European Securities and Markets Authority (ESMA) published “Strategic Orientation 2020-22” with promises to address concerns about cyber dangers.

As risks arise from digitalization, ESMA stresses the importance of studying them. The organization aims to keep business continuity while simultaneously maintaining proper protection against cyber threats with technology.

ESMA intends to study new opportunities revolving around investor protection and cooperation with national authorities.

SEC’s Office of Compliance Inspections and Examinations (OCIE) underlined that ongoing advancements in financial technologies alongside digital assets need closer attention. Moreover, the digital asset market’s rapid growth raises risks for investors that don’t recognize the difference between them.

New priorities include investor protection, supporting responsible capital formation, and ensuring market integrity. Additionally, through SEC’s national exam program, the agency plans to identify and monitor risks, improve industry practices, and react to misconduct.

OCIE still plans to supervise SEC-registered firms catered to digital assets under six main areas like employee supervision and compliance control.

ESMA’s Power and Responsibility

Outside its plans on digitalization, ESMA has new responsibilities and other legislative developments. These revolve, namely, around supervisory convergence, investor protection, international tasks, transversal topics, and direct supervision.

With supervisory convergence, the agency plans to enhance supervisory tools like peer reviews, Q&As, collective actions, and strategic priorities. It also plans to develop an EU supervisory handbook.

Investor protection welcomes coordination with mystery shopping on retail investment and develops retail risk indicators. Additionally, it plans to collect, analyze, and report on consumer trends.

Third-country equivalence assessments fall under the international task, including monitoring regulatory and supervisory developments. Additionally, it will assist the European Commission in preparing equivalence decisions and a strengthened role in international fora.

Accordingly, digitalization movements fall under transversal topics, which requires ESMA to provide sustainable finance and proportionality to activities.

ESMA will also have direct supervision on 3rd country central counterparties and critical benchmarks.

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