ESMA warns crypto perpetual derivatives likely fall under CFD rules

The EU authority tracking compliance under the MiCA framework issued a warning to those marketing crypto derivatives as “perpetual futures or perpetual contracts.”

The European Securities and Markets Authority (ESMA), the financial markets regulator and supervisor in the European Union, issued a notice to remind entities to assess investment vehicles providing leverage exposure to cryptocurrencies.

In a Tuesday notice, ESMA said that derivatives products, including those marketed as “perpetual futures or perpetual contracts” tied to cryptocurrencies like Bitcoin (BTC) or Ether (ETH), likely fell within the scope of intervention measures applied to contracts for differences, or CFDs. The EU Authority warned companies to “take appropriate steps to identify, prevent, or manage conflicts of interest that may arise from the offering of these products.”

“Where these derivatives meet the definition of a CFD, they are subject to the applicable product intervention requirements, including leverage limits, a mandatory risk warning, a margin close-out and negative balance protection, and the prohibition of monetary and non-monetary benefits,” said ESMA.

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