Understanding the EU’s “Reverse Solicitation” rule for crypto services.
What is Markets in Crypto-Assets Regulation (MiCAR)?
→ a landmark piece of legislation that creates a harmonized set of rules for crypto in the EU, fully operational from December 30, 2024.
What is the general rule?
→ a firm must be officially authorized and have a registered office in an EU member state. This means that firms based outside the EU (referred to as “third-country firms”) are generally prohibited from actively marketing or selling their crypto services to clients inside the EU.
The Exception: What is “Reverse Solicitation”?
→ a non-EU firm is permitted only if that service is “initiated at the exclusive initiative of the client”, means the client must be the one to make the first move, without any prompting, advertising, or marketing from the firm.
Examples of solicitation (prohibited for non-EU firms)?
• Digital Marketing
◦ Internet commercials, promotional banners, and website pop-ups
◦ Promotional emails
◦ Social media activities aimed at an EU audience
◦ Using SEO or geo-targeted ads.
• Direct Outreach and Events
◦ Unprompted telephone calls or face-to-face meetings
◦ Distributing press releases or brochures in the EU
◦ Participating in roadshows or trade fairs to promote services
• Third-Party and Influencer Marketing
◦ Sponsorship deals
◦ Using influencers (“(f)influencers,” short for financial influencers)
◦ Engaging any third party to act on the firm’s behalf
Why the reverse solicitation exemption is so limited?
→ Protect EU Investors.
→ The burden of proof on the Firm.
→ Legal disclaimers are basically worthless
→ The firm is responsible for its influencers and affiliates
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