Will ESMA’s crackdown put an end to leveraged crypto trading across the EU?

crypthub

about 8 hours ago

Regulatory Scope

ESMA announced that any crypto product offering leverage must obey existing EU CFD rules, regardless of how it is labeled. Perpetual futures or contracts are treated as contracts for differences because they use borrowed money and settle in cash. The watchdog stresses that name changes cannot evade these regulations.

Compliance Obligations

Platforms must impose leverage caps, display clear risk warnings, and automatically close positions that exceed loss thresholds. They are required to offer negative‑balance protection, eliminate bonuses tied to leveraged products, and restrict access to experienced traders only. Enhanced checks on retail users and conflict‑of‑interest safeguards are also mandated.

Market Impact

The ruling has prompted firms like Kraken to bar EU customers from new perpetual futures linked to tokenised stocks. Many exchanges are reconsidering product offerings to avoid losing retail access in Europe. While the measures aim to protect investors, they will likely reduce the availability of high‑risk, high‑reward trades.