ESMA consults on competence requirements for crypto asset advisers

The European Securities and Markets Authority (ESMA) has launched a consultation on minimum standards of competence and qualification requirements for anyone advising investors about crypto assets. The requirements will also apply to those responsible for providing “automated or semi-automated” customer journeys.

The pan-European watchdog said that, given the fast growth and high volatility of crypto assets, it was crucial that advisory staff at crypto asset service providers (CASPs) knew enough about them to “fulfil their obligation to act in the best interests of clients”.

ESMA is proposing that a professional qualification demonstrating competence would involve 80 hours of training followed by six months of supervision. Nathan Catania, a partner at consultancy XReg, said that finding suitable training could pose a problem for CASPs.

“Given it is a new and evolving area and ESMA are just setting standards on what specific knowledge advisors need, there is currently a lack of providers of courses such as those you see for advisers of traditional investments. It will take time for the market to develop suitable training courses.”

An ESMA spokesperson said that the regulator did not have a list of educational providers for crypto advice qualifications but said it expected established providers of financial qualifications training to begin offering such curricula. The spokesperson said ESMA did not know how many CASP employees would be affected by its competence requirement as the regulator did not collect this data.

Mandate

Article 81(7) of the Markets in Crypto-Assets Regulation (MiCA) requires CASPs to ensure those advising investors on crypto assets have the necessary knowledge and competence to do so.  In its consultation paper, ESMA said CASPs should also be responsible for any employees giving investors information — not just advice — on their behalf, and so was issuing own-initiative guidance designed to ensure such oversight.

ESMA said it had drawn on knowledge requirements set out in the Markets in Financial Instruments Directive (MiFID II) when drafting MiCA guidance, but tailored its proposals to deal with the specific risks associated with crypto assets.

This includes CASPs ensuring any staff giving information or advice on crypto assets or crypto asset services are “knowledgeable about the characteristics, risks and features of distributed ledger technology, crypto asset services and crypto assets”.

Under the proposals, employees’ competence would be assessed and recorded annually, with a minimum requirement of 20 hours of continuous professional development.

Staff giving advice would also be expected to have a more detailed understanding of crypto assets than those who simply provided information, ESMA said.

The consultation closes on April 22.

UPDATE: This article was updated at 9am on February 19, 2025, to add information from ESMA at paragraph five.