SKN | ESMA Seeks Stronger Powers to Freeze Crypto Assets and Police MiCA Violations

Key Points:

• ESMA is calling for stronger enforcement powers, including the ability to instruct crypto firms to freeze assets when there are reasonable grounds to suspect links to financial crime or terrorist financing.
• National regulators could receive greater authority to remove fraudulent websites and target unauthorized firms, including crypto companies outside the EU that actively solicit European investors.
• The proposals form part of the MiCA review and would also tighten rules around crypto marketing, third-party promotion and disclosure of customer costs.

The European Securities and Markets Authority is calling for stronger powers to enforce the European Union’s Markets in Crypto-Assets Regulation, arguing that existing procedures can allow suspicious funds to disappear before regulators can intervene. The proposals would give ESMA and national authorities greater authority over asset freezes, fraudulent websites and unauthorized crypto firms, potentially raising compliance requirements for digital-asset businesses operating across Europe.

The recommendations arrive as MiCA moves from implementation toward its first major regulatory review. For crypto investors and institutions, the changes could materially affect how exchanges, stablecoin issuers and other service providers manage compliance, marketing and cross-border operations across the EU.

ESMA Wants Faster Control Over Suspicious Assets

ESMA said regulators should be able to order crypto companies to freeze assets when there are reasonable grounds to suspect connections to financial crime, money laundering or terrorist financing. The watchdog argued that lengthy procedures can allow suspicious assets to move beyond effective recovery before authorities receive the necessary intervention.

The proposal would strengthen the enforcement framework around an industry in which transactions can move across multiple wallets and jurisdictions within minutes. ESMA also wants national authorities and the European regulator to have stronger powers to detect, block and deactivate fraudulent websites.

Existing MiCA rules already give national competent authorities significant powers, including the ability to suspend services, prohibit unauthorized activities and seek the freezing or sequestration of assets under applicable procedures. ESMA’s proposal would strengthen and accelerate the framework rather than create regulation from scratch.

Cross-Border Firms Face Greater Scrutiny

One of the central issues is the treatment of third-country crypto companies. ESMA wants national regulators to receive specific powers to act against firms based outside the EU when those businesses actively solicit European investors without the required authorization.

The proposal addresses a structural challenge created by the global nature of crypto markets. A platform can serve European customers while maintaining its legal or operational infrastructure elsewhere, making enforcement more difficult when regulators lack direct jurisdiction over the underlying business.

For institutions, the proposed framework could increase the importance of verifying whether counterparties are properly authorized under MiCA. ESMA’s latest interim register, updated September 24, includes crypto-asset service providers as well as a separate category for non-compliant entities.

Marketing and Cost Disclosure Could Also Tighten

ESMA is also proposing stronger restrictions on misleading crypto marketing, including activities involving influencers and third-party promoters. The watchdog wants greater transparency around fees, costs, risks and rewards, particularly where consumers may not have sufficient information before entering a crypto transaction.

MiCA already requires crypto-asset service providers to communicate with clients in a fair, clear and non-misleading manner. Existing rules also require cost information in certain advisory and portfolio-management relationships. ESMA’s proposals would extend the supervisory focus and make cost transparency more consistent across the market.

MiCA Enters a More Enforcement-Focused Phase

The recommendations are part of ESMA’s response to the European Commission’s consultation on the review of MiCA. Beyond enforcement, ESMA is proposing changes covering DeFi, staking, lending, borrowing, stablecoins and tokenized capital markets, reflecting how quickly the digital-asset industry has evolved since the framework was designed.

For crypto investors, the key issue will be whether stronger enforcement creates greater market confidence without producing excessive fragmentation between national regulators. The next stage of the MiCA review will determine how these recommendations are translated into legislation and supervisory practice. Meanwhile, exchanges, issuers and institutional service providers will need to monitor asset-freezing procedures, cross-border enforcement, marketing rules and cost disclosures as European crypto regulation moves toward a more intervention-oriented phase.