Much of Zumo’s work at present is focused on providing crypto-asset service providers (CASPs) across Europe with the knowledge and resources they need to comply with the Markets in Crypto-Assets (MiCA) regulation, particularly the mandated sustainability disclosures. 

We’re acting as a relay between the continent’s CASPs and European Union (EU) regulators regarding some of the logistics that apply to MiCA. As part of this ongoing effort, we recently took part in the MICAR Expert Roundtable Series Dublin session, held in collaboration with the European Commission.

Initiated by Mariana de la Roche and Dr. Nina-Luisa Siedler, the Series continues to build legal clarity within the EU’s evolving regulatory framework for crypto-assets under MiCA. The Dublin session was hosted at the Trinity Business School in the Irish capital, and brought together key players from the regulatory and crypto sectors to explore essential topics related to MiCA. 

This session focused specifically on monitoring and reporting issues for CASPs, with Zumo’s Research and Policy Lead, Daniel Taylor, examining the application and enforcement of CASP sustainability disclosure requirements, as well as challenges and opportunities in the MiCA sustainability reporting template. 

Getting to grips with the application and enforcement of CASP sustainability disclosure requirements

Zumo’s MiCA CASP Sustainability Readiness Assessment snapshot report highlighted a sustainability compliance knowledge gap amongst in-scope service providers. 

Whilst 75% consider themselves ‘very familiar’ with MiCA regulation, less than a third say they are ‘knowledgeable’ about MiCA’s sustainability reporting obligations. As mandated in MiCA Article 66, MiCA authorised CASPs – including exchanges, brokerages, custodians and trading firms – that are active in the EU, or wish to provide their services into the EU, now need to have a compliant website disclosure in place covering the environmental impact of offered crypto-assets.

When asked about steps taken to comply with the MiCA sustainability disclosure requirements, only 25% of respondents said they were already prepared to be compliant, while 63% said they were still exploring compliance options. 

In Dublin, Daniel led a discussion on the expected application and enforcement of incoming CASP website sustainability disclosure requirements. Compliance with such requirements forms a ‘Day 1’ CASP obligation, and the conversation revolved around the lack of industry clarity on how CASP preparedness for sustainability requirements might be practically assessed and enforced. 

Participants agreed that, in light of supplementary European Securities and Markets Authority (ESMA) Q&A guidance on the topic, the common interpretation should be that whilst CASP sustainability disclosures, as a Title V article, went live on 30 December 2024, the actual operationalisation of that requirement comes at the point that a virtual-asset service provider (VASP) is authorised as a MiCA CASP, wherever this might fall within the MiCA transitional period.

When it comes to the transitional period, there is a grandfathering clause [Article 143(3) MiCA] providing a limited period of protection for CASPs operating under existing legislation. 

CASPs that provided their services in accordance with applicable national law before 30 December 2024 may continue to do so until 1 July 2026, or until they receive or are denied MiCA authorisation, whichever comes first. However, individual EU Member States may reduce or waive this transitional period, depending on their existing national frameworks. Some Member States are opting for shorter periods to enhance market stability and investor protection, and this is the case in Ireland, where the grandfathering period is 12 months. 

With regulators represented in the room, the discussion moved towards operationalisation and enforcement. There was a focus on the possibilities for regulatory arbitrage, and the already very divergent landscape in terms of experiences with National Competition Authorities (NCAs) of Member States and the guidance for application processes made available by them. 

As with many areas of MiCA implementation, it was agreed that the degree to which a requirement is enforced, and how aggressively, depends on the degree to which the responsible EU-level body, in this case ESMA, would be willing to issue guidance, prioritise the topic in engagement with NCAs, and ultimately the standards and practices adopted in the NCA context.

It was recognised that this was an area in which there needs to be much more detailed communication and guidance on the specific topic of sustainability beyond the Level 1 and Level 2 documentation already available.  

The session concluded with a series of clearly defined calls to action:

• NCAs should use industry stakeholder engagement as a way to collate best practice on assessing sustainability requirements.

• Further guidance must be provided both within application processes and at ESMA level sufficient for industry to operationalise the sustainability requirement.
• If this topic is to be perceived as pressing, it needs to be clearly communicated as such.

Understanding the challenges and opportunities in the MiCA sustainability reporting template

In a second session exploring MiCA sustainability requirements, Daniel led a discussion looking at common questions around the interpretation of the MiCA sustainability reporting template, as well as the need for joined up thinking about the evolution of any further iterations of the topic. 

The starting point was that the current drafting as proposed by ESMA leaves a meaningful margin of ambiguity in interpretation, and that there is room to progress the ambition of sustainability standards for crypto-assets in the EU in future work.

On the first topic of template ambiguities, participants discussed their interpretation of ‘best efforts’ and the limits of acceptable methodology, with the overall view there is clearly a need to adhere to a demonstrably rigorous approach in line with regulatory guidance, but that nevertheless this is not at the point of having a unified pan-industry standardised methodology. 

Here, participants discussed the standardisation work in progress in various quarters as well as an open question of whether, in the spirit of ESG rating type approaches, providers of methodologies or underpinning data might in time come under regulation themselves. Potential tests of ‘material changes’ requiring updates to disclosures was also discussed, with the suggestion that this might naturally be assessed based on percentage change and deviation from first baseline observation.

On the more technical side, it was agreed that there is a pressing priority for industry to be given further guidance from ESMA on aspects of technical detail – and that industry could play a role in highlighting where some of those issues arise. This sentiment mirrored Zumo’s snapshot report, where 50% of respondents cited unclear regulatory requirements and expectations as a challenge to achieving MiCA sustainability compliance. 

Again, the session was rounded off by robust calls to action:

• Regulator guidance should be bolstered at the earliest opportunity. One effective route could be non-legislative supplementary guidance issued by ESMA to clarify operational detail as collated and fed back by industry.

• Regulators should involve key industry stakeholders in any further evolution of the crypto-asset sustainability scope, including harmonisation of methodology as well as any broadening of the regulatory remit.

By fostering dialogue, championing actionable steps, and providing new, accessible solutions – such as  our award-winning Oxygen product – we are supporting the transition towards a more transparent, sustainable, and compliant crypto industry.

We look forward to travelling across Europe to take part in subsequent sessions of the MICAR Expert Roundtable Series. Stay tuned!