Safeguarding Consumers

MiCA prohibits unfair practices, such as misleading advertising or deceptive marketing tactics, aligning with its overarching objectives to promote market fairness and investor confidence.

Fairness in the crypto market means setting standards for the issuance and trading of crypto-assets, ensuring all participants have equal access to information and opportunities. MiCA also requires firms to implement measures to safeguard the interests of novice investors and individuals with limited financial literacy.

Firms must prioritise the best safeguarding of customers and investors, promoting a secure and accessible digital economy. They should ensure consumer and investor interests are considered throughout product and services lifecycles and be able to clearly demonstrate solid custody and safekeeping measures.

The regulation contains specific rules regarding safeguarding including data protection, account segregation, fraud protection, in addition to less prescriptive expectations. CASPs should consider a multi-faceted approach to safeguarding, combining elements such as security protocols, compliance, investor protection, transparency and resilience to ensure robustness.

All CASPS, including those operating exchanges or platforms will need to fully consider and account for user interests. They should be able to demonstrate risk management practices that go beyond mere compliance and align with the spirit of the regulation. As crypto-markets are often volatile and investor maturity varies, cooling-off periods, redress and enhanced disclosures should be considered of to support these interests.

Accuracy in information disclosure is crucial. Investors need relevant, truthful information about the assets they are buying, selling or holding. The information provided must effectively support investors and consumers in understanding the risks, the operational mechanisms of the assets and the market dynamics.

MiCA emphasises the need for clear and accurate disclosure of product features and risks to investors. Firms who implement robust marketing and product governance will reduce the opportunity for errors in communications, advertising campaigns and product information.

As the cryptocurrency market is inherently volatile, firms should ensure robust risk management practices are in place to prevent and detect fraud, cyber-attacks, and market manipulation. Risks should be documented with associated controls, and clear lines of defence to provide assurance on the completeness and effectiveness of those controls. Information security risks should be assessed comprehensively with proactive monitoring to ensure prompt risk response.

In addition to risks relating to prudential requirements, CASPs should be prepared to demonstrate how they manage risks relating to consumer protection, market conduct, transparency, disclosure, governance, marketing, and suitability amongst others.

Effective governance is essential to ensure a safe and diverse digital economy that balances innovation with market integrity.

This involves implementing clear oversight to prevent insider trading, unauthorised disclosure of confidential information, and market manipulation in relation to crypto-assets.

CASPs should implement ongoing monitoring and processes to ensure compliance with regulation and requirements. Necessary adjustments should be made to address any emerging challenges in a timely manner.

MiCA introduces requirements which are relevant to many front-line and back office CASP employees, including those involved in marketing, selling and customer services. Entities should ensure a strong risk culture is in place to ensure all personnel understand and comply with obligations under the new regulation.

Firms should set clear tone from the top and consider internal messaging on the importance of identifying, reporting, and responding practices that could undermine market integrity.

KPMG’s Risk and Regulatory Consulting Practice is well versed in supporting firms with regulatory compliance and consumer protection. We have a clear understanding of how to prioritise safeguarding consumer interests, with experience guiding firms in meeting MiCA requirements, preparing for regulatory change and strengthening consumer protection measures.

1. KPMG can assist you with a readiness assessment and identify required changes to be implemented. We have extensive experience in providing comprehensive support in licensing and operating requirements to ensure conduct, compliance and regulatory expectations are met.
2. KPMG has tried and tested methodologies to conduct regulatory gap analysis, ensuring gaps and weaknesses are promptly identified. Our systematic approach is comprehensive and ensures clear recommendations that are actionable and sustainable. We can also offer post implementation reviews to support assurance on MiCA regulatory compliance.
3. KPMG can help firms establish a programme of work to interpret and understand the impact of required changes to ensure legal and regulatory compliance. We are well versed in considering, reviewing, and assessing the impact of changes on processes, procedures, technology within banks, financial services and fin tech organisations.
4. KPMG expertise includes evaluating Risk Assessment and Conduct Risk Frameworks for financial products, analysing the effects of regulatory modifications on customer journeys and creating strategies to ensure positive consumer experiences.
5. Drawing on our vast experience in advising clients on consumer-related matters such as product governance, customer assurance and equitable outcomes, KPMG can help crypto-asset service providers to meet expectations on safeguarding consumer and investor interests.
6. KPMG can help firms establish a programme of work to interpret and understand the impact of required changes to ensure legal and regulatory compliance. We are well versed in considering, reviewing, and assessing the impact of changes on processes, procedures, technology within banks, financial services and fin tech organisations.
7. KPMG expertise includes evaluating Risk Assessment and Conduct Risk Frameworks for financial products, analysing the effects of regulatory modifications on customer journeys and creating strategies to ensure positive consumer experiences.