ESMA – Earlybirds Invest

Natasha Cazenave, executive director at the European Securities and Markets Authority (ESMA), has raised concerns about crypto tokens linked to stock prices.

She stated that they may be giving people the wrong impression about what they actually own.

Speaking at a conference in Dubrovnik, Croatia, Cazenave explained that these tokens, while offering benefits such as continuous trading and the ability to buy in small portions, typically do not come with any legal ownership rights.

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This means that holders of such tokens are not entitled to vote, receive dividends, or participate in shareholder meetings.

Cazenave emphasized the importance of clear information and warnings to prevent confusion. She stated that it is necessary to explain the risks and limitations of these products, especially when they are designed in ways that do not grant full shareholder status.

While supportive of innovation, ESMA made it clear that investor safety comes first. Cazenave said new technology should be developed in a way that does not put users or financial markets at risk.

If done under proper legal rules, tokenization could improve cross-border operations, lower costs, and make financial systems more transparent.

She also mentioned the EU’s blockchain pilot, which allows companies to test digital tools under flexible rules. Insights from that program, as well as from the EU’s Markets in Crypto-Assets (MiCA) regulation, will guide future steps in regulating tokenized assets.

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Minimum competency standards

The draft guidelines establish clear criteria for professional qualifications, work experience, and continuous education for staff employed by crypto-asset service providers (CASPs).

Under the proposal, individuals providing investment advice on crypto-assets must meet stricter competency requirements than those offering basic informational services.

ESMA outlined that advisors must hold a tertiary education degree or equivalent, undergo at least 160 hours of professional training, and have at least one year of relevant experience. Those providing general information on crypto-assets would require a professional qualification of at least 80 hours and six months of supervised experience.

All professionals must undergo an assessment exam and complete ongoing training — a minimum of 10 hours annually for information providers and 20 hours for advisors — to ensure their knowledge remains up to date.

The guidelines also emphasize the importance of understanding crypto-specific risks, including market volatility, cybersecurity threats, blockchain governance, and liquidity risks associated with major asset holders.

Additionally, ESMA proposes that firms conduct annual internal reviews to assess staff compliance with these standards.

Regulatory implications

The consultation comes as MiCA’s provisions governing crypto-asset services take effect across the EU, with full implementation expected in 2025. The regulation seeks to establish a harmonized legal framework for digital assets, covering transparency, investor protection, and prudential oversight.

ESMA noted that the growth of the crypto industry warrants higher standards of operation to ensure investors remain protected.

According to the regulator:

“The rapid expansion of crypto markets has increased risks, particularly for retail investors. Ensuring that service providers maintain a baseline level of expertise is crucial for investor protection and market integrity.”

The guidelines closely align with existing MiFID II rules for financial markets but introduce crypto-specific considerations, reflecting the unique nature of blockchain-based assets.

Market participants, including CASPs, investors, financial institutions, and industry associations, are invited to provide feedback on the proposed standards.

ESMA will accept comments until April 22, 2025, and expects to publish the final guidelines in the third quarter of the year.