The European Union’s Markets in Crypto Assets regulation (MiCA) has set up licensing requirements for crypto issuers and service providers, including exchange platforms. However, there has been confusion among crypto asset service providers (CASPS) regarding the deadline to make sustainability disclosures reflecting their environmental footprint. Despite a clarification by the European Securities and Markets Authority (ESMA), many CASPS may not be aware that they need to report ESG-data (environmental, social, and governance-related data) from January 1st, 2025.
Tim Zölitz, the chief risk officer at Crypto Risk Metrics, expressed concern that more than 80% of crypto asset service providers are not yet aware of the reporting requirements. The confusion around the correct deadline for sustainability disclosures may be attributed to differing interpretations of the MiCA law, which requires disclosures of environmental impact to be adequately identified and disclosed. This information may be obtained from crypto-asset white papers, which has led to misconceptions about the specific deadline for reporting.
In an effort to enhance transparency and collaboration regarding ESG-related data, Crypto Risk Metrics has inked a Memorandum of Understanding (MoU) with The Digital Token Identifier (DTI) Foundation. The DTI Foundation is the EU’s proposed crypto-asset identifier for transparency reporting. The collaboration aims to ensure that crypto entities have access to accurate and timely ESG-related data to comply with the regulatory requirements set forth by MiCA.
The confusion surrounding the deadline for sustainability disclosures stems from the wording in the adopted MiCA regulation text, which has since been clarified in consultation papers released by ESMA. The regulator has emphasized that crypto asset service providers are required to display ESG-data on their websites for all crypto-assets in relation to which they provide services, regardless of whether the information can be obtained from white papers.
ESMA’s clarification aims to provide clear guidelines for crypto entities to comply with the reporting requirements specified in the MiCA law. By ensuring that CASPS are aware of their obligations to disclose environmental, social, and governance-related data, the EU seeks to enhance transparency and accountability within the crypto industry. This initiative is crucial in addressing concerns about crypto’s environmental impact, particularly through mining operations, which have been a major focus for regulators and investors.
Going forward, crypto asset service providers and other stakeholders in the industry must stay informed and updated on regulatory requirements to avoid any misunderstandings or misinterpretations. By collaborating with organizations like the DTI Foundation, crypto entities can access the necessary resources and guidance to meet their compliance obligations under the MiCA law. Overall, enhancing transparency and accountability in the crypto industry is essential for fostering trust and encouraging broader adoption by institutional investors and the general public.
