ESMA issues warning to crypto firms over wind-down deadline

The European Securities and Markets Authority (ESMA) has issued a formal notice ordering unauthorised crypto-asset service providers to begin an orderly wind-down of their European Union operations following the conclusion of the Markets in Crypto-Assets Regulation (MiCA) transitional period on July 1, 2026.

While many providers will have secured the necessary authorisation by the start of July, significant entities currently operating under various national regimes may fail to meet the upcoming deadline.

ESMA expects unauthorised firms to take immediate steps to cease their activities within the European Union while ensuring that client interests are prioritised and risks to market integrity are mitigated.

Firms are required to stop onboarding new European clients immediately, cease all marketing and solicitation efforts, and refrain from opening any new accounts.

Services must be restricted solely to actions necessary for the sale or transfer of crypto-assets, the reallocation of holdings, or the closing of existing positions.

The custody of client assets may only continue for the minimum period strictly required to facilitate an orderly exit.

Providers are instructed to communicate clearly, promptly and repeatedly with both retail and institutional clients regarding the measures taken to safeguard their assets and the specific details of the wind-down plans.

Clients must be kept informed of the timeline for disposing of, transferring, or closing their positions, and firms should include a final date by which any remaining holdings will be closed automatically.

All wind-down arrangements must comply with relevant European Union or national conduct laws and AML/CFT obligations.

Firms must maintain effective AML/CFT controls throughout the process, including customer due diligence, transaction monitoring, and screening against relevant sanctions lists.

ESMA expects unauthorised providers to act with diligence and due care to ensure that clients are protected during the transition.

In instances where clients are transferred to a firm that has already gained MiCA authorisation, the receiving entity must perform all required onboarding procedures and necessary anti-money laundering checks.

The regulator also issued a reminder that entities established outside the European Union are prohibited from providing services to European clients or soliciting business, even in a business-to-business context.

MiCA strictly prohibits the outsourcing or delegating of certain services, such as custody, to entities that do not hold the required authorisation.

Consumers have been warned that clients of unauthorised providers will not benefit from the safeguards mandated by MiCA, including protections for their assets.

Investors are urged to verify whether their current provider is listed in the ESMA Register and to act promptly if the firm is not authorised, such as by moving assets to a regulated provider or a self-hosted wallet.

Clients encountering issues are advised to contact their service provider in the first instance.

National Competent Authorities (NCAs) are actively engaging with the firms concerned and will coordinate with the European Banking Authority (EBA) and the Anti-Money Laundering Authority (AMLA) to monitor the situation.

These bodies will maintain a strong focus on protecting clients, maintaining financial stability, and ensuring market integrity.

Within the existing cooperation framework, authorities may take further coordinated action against unauthorised providers if the firms fail to wind down without delay.