ESMA guidelines on reporting standards for derivatives on crypto assets

Jun 2nd '23

EMIR Refit is broadening the scope of reporting on derivatives and now does so for crypto derivatives.


There is no longer any doubt that derivatives on crypto assets must be reported because European Securities and Markets Authority (ESMA) has published recommendations on doing so as part of the EMIR Refit guidelines. The regulator creates a new field to categorise these derivatives. Only those derivatives on cryptoassets that fall under the EMIR definition of “derivative” or “derivative contract” are subject to the enhanced reporting requirements. Counterparties should rely on the applicable regulatory framework for reporting the specifics of derivatives. As a result, if a derivative on a crypto asset is regarded as a financial instrument under MiFID, it must also be reported under MiFIR in compliance with its features. When a counterparty forms a derivative contract with a cryptocurrency asset as the underlying, it must mark the derivative report field 2.12, “Derivative based on crypto-assets,” as “True” before submitting it to an EMIR Trade Repository.


Please take note that ESMA is creating a new crypto legislation, thus this advice is likely to change and the EMIR reporting obligations for crypto derivatives are likely to be clarified and increased. When drafting the ITS and RTS on reporting, ESMA decided not to include any specific requirements with regard to the reporting of derivatives based on crypto-assets until there is more developed and coherent regulation due to the ongoing developments in regulation that are currently being discussed about the crypto-assets. Because of this, ESMA has only chosen to add the new field “Derivative based on crypto-assets” to the RTS on reporting, allowing it to analyse trade volumes, outstanding risk, and the reporting of these instruments. A new underlying category of assets would not be in compliance with the ITS’s reporting requirements as a result. Similar to this, requiring that all derivatives on crypto-assets be reported as commodity derivatives, for example, would be incorrect and not future-proof.


ESMA reminds users that only currencies listed on ISO 4217 Currency Codes are permitted in the currency fields for derivatives based on crypto-assets. Therefore, no so-called crypto-currencies should be entered into these fields. Only the field “Derivative based on crypto-assets” with a boolean format and a value converted to one of the listed ISO 4217 currency codes must be reported under RTS’s reporting requirements for derivatives on crypto-assets that meet the definition of derivatives under MiFID. The reporting for indexes and baskets based on crypto-assets is the same as for regular derivatives. The counterparties must submit the index’s name as well as, if available, the index’s ISIN and/or four-letter identification code. Only those components of baskets that are financial products exchanged on a trading venue should be reported by counterparties.


Crypto CFDs are one of the most popular instruments traded on the market; since they are now reportable, businesses must set up the necessary reporting infrastructure. Therefore, if your company is now engaged in any crypto-based derivatives, you are in scope and need to start considering reporting.


We hope this article proves insightful and helps your business. Thank you for reading!




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