European securities regulator ESMA is preparing a knowledge test for crypto advisers

The European Securities and Markets Authority (ESMA) has published a consultation paper seeking comments on a proposed knowledge assessment for persons giving advice on crypto-assets or providing information about crypto-assets or crypto-asset services on behalf of crypto-asset service providers (CASPs). This is part of the technical standards the agency is developing under Markets in Crypto-Assets (MiCA) regulations.

ESMA has taken it upon itself to extend the knowledge requirements in MiCA beyond an assessment for advisers to information providers working for CASPs. That is necessary, in its view, to meet the MiCA requirement that CASPs act in the best interests of their clients. Also, staff who are not exposed to the public or clients need to maintain a knowledge base if they are responsible for “parameters and settings” for automated services.

The proposed ESMA assessment lines up with current practice

ESMA is modeling its requirements for CASPs on MIFID II (Markets in Financial Instruments Directive 2014) regulatory guidelines for staff giving advice on investment products. 

ESMA divides the knowledge it considers essential into 11 categories, including key characteristics and risks of a crypto asset, its tax implications, fees, and costs, sources of volatility, and differences between MIFID II and MiCA protections. 

The paper suggested that 80 hours of qualifying training plus six months’ work under supervision would be needed for new hires to meet knowledge requirements or one year’s work under supervision. Current staff with more than a year of experience would be required to demonstrate their competence.

ESMA says maintaining knowledge is a continuous practice

ESMA also suggested minimum requirements for hiring. These include at least three years of tertiary education. Knowledge should be tested annually, the agency added, and be subject to annual continuous professional development. 

Comments on the paper are being accepted through April 25. The guidelines will come into force 60 days after their official publication.

MiCA regulations on stablecoins came into force on June 30. In January, ESMA released a statement saying national regulators should ensure that the European stablecoin policy should be enforced no later than the end of the first quarter of 2025. It released a briefing on MiCA implementation best practices the same month summarizing its technical instructions to national regulators adopting MiCA.

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