Crypto derivatives fall under CFD rules
The European Securities and Markets Authority (ESMA) has issued a warning to market participants who position their crypto derivative products as "perpetual futures" or "perpetual contracts". According to the regulator, such instruments will likely be treated under the rules applicable to contracts for difference (CFDs).
This is an important statement, as in Europe, CFDs are subject to special regulations under the Markets in Financial Instruments Directive (MiFID II). Key requirements include risk disclosure, leverage limits, and other protective measures for retail investors.
Thus, companies offering crypto "perpetual" derivatives will have to bring their products and marketing in line with the norms applicable to CFDs. Failure to comply with these rules may result in hefty fines and other sanctions from national regulators.
This is another step by ESMA to tighten control over the rapidly evolving crypto derivatives market. The regulator has previously issued warnings about the risks associated with such instruments. Now, it has effectively equated them to CFDs, which imposes additional obligations on market participants.
Overall, this ESMA decision indicates the EU authorities' desire to ensure more robust protection for retail investors actively engaging in crypto derivative transactions. Companies operating in this space should carefully study the regulator's requirements and bring their activities in line with them.