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The EBA and ESMA analyse recent developments in crypto-assets 16 January 2025 Digital Finance and Innovation The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) today published a Joint Report on recent developments in crypto-assets, analysing decentralised finance (DeFi) and crypto lending, borrowing and staking. This publication is the EBA and ESMA’s contribution to the European Commission’s report to the European Parliament and Council under Article 142 of the Markets in Crypto-Assets Regulation (MiCAR). EBA and ESMA find that DeFi remains a niche phenomenon, with value locked in DeFi protocols representing 4% of all crypto-asset market value at the global level. The report also sets out that EU adoption of DeFi, while above the global average, is lower than other developed economies (e.g. the US, South Korea).  The EBA and ESMA observe that the number of DeFi hacks and the value of stolen crypto-assets has generally evolved in correlation with the DeFi market size. Since flows on decentralised exchanges represent 10% of spot crypto trading volumes globally, DeFi protocols present significant risks of money laundering and terrorist financing (ML/TF). The EBA and ESMA find the implications of maximal extractable value (MEV) on DeFi markets are widespread in DeFi and negative externalities of MEV would require technical solutions. On the lending, borrowing and staking of crypto-assets, the report contains an analysis of the main types and typical features of the business models observed in the market, in both centralised and decentralised forms. These services are offered by a number of crypto-asset service providers (CASPs) in EU jurisdictions which in some cases also offer regulated crypto-asset services.  Based on the existing (limited) evidence, there appears to be limited engagement of EU consumers and financial institutions with crypto lending, borrowing and staking services. The report sets out and assesses the specific risks associated with each of them, such as excessive leverage, information asymmetries, exposure to ML/TF risks, and systemic risks arising from re-hypothecation and collateral chains, procyclicality and interconnectedness. In particular, some users may receive insufficient information on the terms and conditions of these services in areas such as fees, interest rates paid or yields, changes to collateral requirements, among other relevant disclosures. However, the EBA and ESMA have not identified current risks from a financial stability perspective.   Background and next steps Article 142 of MiCAR mandates the European Commission (EC) to submit, after consulting the EBA and ESMA, a report to the European Parliament and Council on recent developments in crypto-assets. On the basis of that provision, the EC is mandated to assess, among others, a) the development of DeFi in crypto-asset markets and the appropriate regulatory treatment of decentralised crypto-asset systems without an issuer or CASPs, including an assessment of the need for and feasibility of regulating DeFi; and b) the feasibility and necessity of regulating the lending and borrowing of crypto-assets. In a letter dated 9 February 2024, the EC requested that EBA and ESMA provide a contribution focusing on certain elements related to DeFi and the lending and borrowing of crypto-assets, including staking. The EBA and ESMA will continue to assess market developments as part of their ongoing mandate to monitor innovative activities in the EU banking, payments and securities sectors.   Further information: Cristina Bonillo Senior Communications Officer press@esma.europa.eu   16/01/2025 ESMA75-453128700-1391 Joint EBA-ESMA Report on the recent developments in crypto-assets (Article 142 of MiCA) 24/01/2025 EBA-ESMA Factsheet DeFi Factsheet on recent developments in crypto-assets: Decentralised Finance (DeFi) 24/01/2025 EBA-ESMA Factsheet crypto lending and staking Factsheet on recent developments in crypto-assets: crypto lending and staking

ESMA and the European Commission publish guidance on non-MiCA compliant ARTs and EMTs (stablecoins) 17 January 2025 Digital Finance and Innovation The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, published today a statement reinforcing the position related to the offer of ARTs and EMTs (also known as stablecoins) in the EU under Market in Crypto Assets regulation (MiCA). The statement provides guidance on how and under which timeline CASPs are expected to comply with the requirements of Titles III and IV of MiCA, as clarified in the European Commission Q&A. In particular, National Competent Authorities (NCAs) are expected to ensure compliance by CASPs regarding non-compliant ARTs or EMTs as soon as possible, and no later than the end of Q1 2025. With the statement ESMA aims to facilitate coordinated actions at the national level and avoid potential disruptions.  The European Commission have also delivered a Q&A, providing guidance on the obligations contained in titles III and IV of MiCA and how these obligations should apply to crypto assets service providers (CASPs).  The Q&A clarifies that certain crypto-asset services may constitute an offer to the public or an admission to trading in the EU and should therefore comply with titles III and IV of MiCA.    Further information: Cristina Bonillo Senior Communications Officer press@esma.europa.eu   17/01/2025 ESMA75-223375936-6099 Statement on the provision of certain crypto-asset services in relation to non-MiCA compliant ARTs and EMTs

Start of DPE regime on 3 February and end of publication of Systematic Internalisers data 24 January 2025 MiFID II: Transparency Calculations and DVC Trading The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, reminds market participants that the new regime for the reporting of Over the Counter (OTC) transactions for post-trade transparency purposes becomes fully operational on 3 February 2025. ESMA also informs stakeholders that the quarterly publication of systematic internalisers (SI) data will be discontinued with immediate effect.  Following the MiFIR review, the responsibility for reporting OTC-transactions will shift from SIs to the new Designated Publishing Entities (DPEs). The old approach has led many investment firms to opt in to the status of SI to be able to report the trades for their clients. When these firms were not dealing on own account on a systematic basis this added disproportionate requirements to them.   The DPE regime (see ESMA’s Public Statement) allows National Competent Authorities (NCAs) to grant the status of DPE to investment firms. DPEs, when they are party to a transaction, will need to make these transaction public through an approved publication arrangement (APA).   ESMA maintains a public register of DPEs by class of financial instruments, to help market participants to identify those entities.   Discontinuation of the SI quarterly calculations  Following the application of the MiFID II amendments, it will no longer be necessary for  ESMA to perform SI calculations from September 2025. In view of the resources needed to perform the calculations and the fact that the regime will end shortly, ESMA has decided to discontinue the voluntary publication of quarterly SI calculations data already now. This action will also reduce the administrative burden for investment firms. Consequently, the mandatory SI regime will no longer apply from 1 February 2025, and investment firms will not need to perform the SI-test. However, investment firms can continue to opt into the SI-regime.   Further information: Cristina Bonillo Senior Communications Officerpress@esma.europa.eu

EU funds continue to reduce costs – at low and varying pace 14 January 2025 Fund Management Risk monitoring The European Securities and Markets Authority (ESMA), the EU financial markets regulator and supervisor, today publishes its seventh market report on the costs and performance of EU retail investment products, showing a decline in the costs of investing in key financial products. Despite this decline the cost levels of funds in the EU remain high by international standards. With more than 50,000 funds and an average fund size almost 10 times smaller than that of for example US mutual funds, EU funds do not exhaust the economies of scale commensurate with the EU’s single market. The market inefficiencies revealed by this higher cost level shows the need to focus on the competitiveness of EU markets, within a future Savings and Investments Union. The key findings in the report are: UCITS costs decline gradually, from high levels: Costs have declined, but investors should continue to consider fund fees carefully in their investment decisions – especially since costs have not dropped for all categories of funds: ongoing costs of mixed funds and equity passive funds have been relatively stable over time.  UCITS performance slightly improved: Returns progressed in 2023 but remained far from their 2021 levels. The annual net performance of bond and mixed funds improved between 2022 and 2023 but remained in negative territories. ESG UCITS with lower costs and higher performance that non-ESG: Ongoing costs of retail ESG funds remain lower or similar to the ongoing costs of non-ESG equivalents. Overall, ESG funds outperformed their non-ESG equivalents in 2023. This hides some disparities across asset classes: non-ETF equity ESG funds outperformed, while equity ETF, fixed income and mixed ESG funds underperformed. Alternative Investment Funds less demanded by retail investors: The market for Alternative Investment Funds remained dominated by professional investors and is less invested by retail investors compared with the UCITS market. The share of retail investors decreased between 2022 and 2023: from 14% to 11%. In 2023, annualised gross and net performance improved significantly compared with 2022, with all fund strategies having positive returns.  Structured Retail Product costs improve but remain difficult to assess for clients: In 2023, the share of products referencing interest rates and inflation rose to around one fifth of sales volumes, a sharp increase from 2022. This trend followed higher interest rates and inflation. Costs – largely charged in the form of subscription fees – fell in 2023 for some common product types, although they vary substantially by payoff type and country. Structured Retail Products that matured in 2023 consistently delivered positive returns in gross terms, but these figures do not consider the incidence of costs paid by investors. Next steps This report aims at facilitating increased participation of retail investors in capital markets by providing consistent EU-wide information on cost and performance of retail investment products. Improvements in data availability continue, but significant data issues persist.  Following the review of the AIF managers directive and the UCITS directive, ESMA has been mandated to produce a report on costs linked to investment in UCITS and AIFs. For the purpose of this report, ESMA launched a data collection exercise together with the national competent authorities. This analysis will be part of an enhanced 2025 ESMA market report on costs and performance of EU retail investment products that is expected to bring new insights and more granular information on fund costs. Background Cost and performance of retail investment products are key determinants of the investments’ benefits for retail investors in the EU. Clear and comprehensive information on retail investment products can help investors assess the past performance and costs of products offered across the EU and foster retail investor participation in capital markets.  ESMA’s report also demonstrates the relevance of disclosure of costs to investors, as required by the MiFID II, UCITS and PRIIPs rules and the need for asset managers and investment firms to act in the best interest of investors, as laid down in MiFID II, and the UCITS and AIFM Directives.   Further information: Dan Nacu-Manole Communications Officerpress@esma.europa.eu 14/01/2025 ESMA50-524821-3525 Market Report on the Costs and Performance of EU Retail Investment Products 2024 14/01/2025 ESMA50-524821-3526 Annexes to the Market Report on the Costs and Performance of EU Retail Investment Products 2024

New governance structure for transition to T+1 settlement cycle kicks off 22 January 2025 Post Trading The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, the European Commission (EC) and the European Central bank (ECB) launched today a new governance structure to support the transition to the T+1 settlement cycle in the European Union. Following ESMA’s report with recommendations on the shortening of the settlement cycle, the new governance structure has been designed to oversee and manage the operational, regulatory and technological aspects of this transition. Given the high level of interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable. The key elements of the new governance model include: An Industry Committee, composed of senior leaders and representatives from market players. The Committee will be chaired by Giovanni Sabatini. Giovanni has a long-standing experience working in securities markets both in the private and public sector. He has served as a member of the European Economic and Social Committee and held roles within IOSCO, EBF and ECSDA. Several technical workstreams, operating under the Industry Committee, focusing on the technological operational adaptations needed in the areas concerned by the transition to T+1 (i.e. trading, matching, clearing, settlement, securities financing, funding and FX, asset management, corporate events, settlement efficiency). In addition, two more general workstreams will review the scope and the legal and regulatory aspects of these adaptations. A Coordination Committee, chaired by ESMA and with representation from the EC, the ECB, ESMA and the chair of the Industry Committee. This committee will ensure coordination between the authorities and the industry, advising on challenges that may arise during the transition. Shortening the trade settlement cycle from the current T+2 framework to one business day should enable faster execution, clearing, and settlement of securities transactions, as well as international alignment, benefiting the entire EU financial ecosystem. The Commission is currently considering the merits of a legislative change mandating a potential transition to a shorter settlement cycle. Next Steps ESMA has recommended 11 October of 2027 as the optimal date for the transition to T+1 in the EU. In its Report ESMA concluded that the transition to T+1 should be implemented in phases, with key milestones including technology upgrades, stakeholder engagement and regulatory alignment.   Further details regarding the governance set-up and participating organisations will be published in the coming days.  Industry representatives interested in contributing to the upcoming work are advised to contact the T+1 Industry Secretariat here. The first meeting of the Coordination Committee will take place on 6 February.   Further information: Cristina Bonillo Senior Communications Officerpress@esma.europa.eu

The European Banking Authority (EBA) today published an Opinion on the interaction between the output floor and Pillar 2 Requirements (P2R) in the context of the mandate set forth in the Capital Requirements Directive (CRD). The Opinion considers that the nominal amount of P2R is not to increase as a result of an institution becoming bound by the output floor and highlights the possibility of double counting in setting the P2R of risks already covered by the effects of a binding output floor.

The European Banking Authority (EBA) today launched its 2025 EU-wide stress test and released the macroeconomic scenarios. This year’s exercise is designed to provide valuable input for assessing the resilience of the European banking sector in the current uncertain and changing macroeconomic environment. The adverse scenario is based on a narrative of hypothetical worsening of geopolitical tensions, with large, negative, and persistent trade and confidence shocks having strong adverse effects on private consumption and investments, both domestically and globally. The severe nature of the adverse scenario reflects the purpose of the stress test exercise, which is to assess the resilience of the European banking system to a hypothetical severely deteriorated macroeconomic environment. The EBA expects to publish the results of the exercise at the beginning of August 2025.

Coordinated Enforcement Action: EDPS findings highlight challenges on right of access to personal data julia Mon, 01/20/2025 - 15:26 Mon, 01/20/2025 - 12:00 Read Press Release Read EDPB Report  0