05 February 2025
Schoenherr publication
czech republic
poland
to the point: financial regulation | 01/2025
Welcome to our to the point newsletter. Every month, we are looking back at the most relevant developments in the area of financial regulation in the CEE region.
In this edition, you will get a mix of updates:
- The EBA has published its final Guidelines on the management of ESG risks, setting new regulatory expectations for financial institutions. These Guidelines establish a framework for identifying, measuring, managing and monitoring ESG-related risks, ensuring institutions remain resilient in the short, medium and long term as the EU transitions toward a more sustainable economy. Under the Guidelines, financial institutions must integrate ESG risk considerations into their internal governance and risk management processes in line with the CRD6. This includes developing detailed plans to assess and mitigate financial risks arising from ESG factors, particularly those linked to the EU's goal of achieving climate neutrality by 2050. These transition plans must align with other sustainability-related regulatory requirements to ensure consistency and preparedness across the financial sector. The new rules take effect on 11 January 2026, although small and non-complex institutions will have until 11 January 2027 to comply.
- The EFAMA has highlighted the critical need for consistent definitions and reporting requirements across EU legislations to reduce the sustainability reporting burden on companies and enhance competitiveness. Asset managers, who must prepare CSRD reports and utilise them for their sustainable investments, rely on corporate sustainability data. Without it, they depend on costly third-party ESG data. The EFAMA seeks clarification that clients' assets are not included in asset managers' CSRD reporting, emphasising that the current CSRD text excludes fund products. Clear and harmonised reporting rules are essential for guiding sustainable investments and ensuring compliance with regulatory obligations. The upcoming Omnibus proposal from the European Commission aims to address these issues, aligning the CSRD with the SFDR and other directives to streamline and simplify sustainability reporting in the EU.
- The ESMA and the European Commission have issued a statement reinforcing the regulatory requirements for asset-referenced tokens (ARTs) and electronic money tokens (EMTs), commonly known as stablecoins, under MiCA. This statement is particularly relevant for crypto-asset service providers (CASPs) offering ARTs and EMTs in the EU, as it sets clear expectations for compliance with Titles III and IV of MiCA. CASPs dealing with non-compliant ARTs and EMTs must align with the new regulatory framework as soon as possible, with a final compliance deadline set for the end of Q1 2025. National Competent Authorities (NCAs) have been instructed to enforce these requirements to ensure that entities offering or admitting such crypto-assets for trading meet legal obligations under MiCA. The European Commission's accompanying Q&A clarifies that certain crypto-asset services may fall under the scope of public offerings or trading admissions, meaning CASPs must ensure full regulatory adherence. This guidance signals an urgent compliance requirement for all entities involved in ARTs and EMTs. Failure to meet MiCA's standards within the given timeframe could result in enforcement actions by national regulators. CASPs should therefore assess their existing offerings, make necessary adjustments to align with MiCA, and prepare for stricter oversight by NCAs across the EU.
- The EBA and the ESMA have published a joint report on recent developments in crypto-assets, focusing on decentralised finance (DeFi), crypto lending, borrowing and staking. This report, which contributes to the European Commission's assessment under Article 142 of MiCA, carries significant implications for entities operating in the crypto sector. For crypto-asset service providers (CASPs) and other financial institutions, the report highlights growing regulatory scrutiny over DeFi activities, particularly due to concerns about money laundering and terrorist financing (ML/TF) risks. While DeFi remains a relatively small segment of the crypto market, its adoption in the EU is increasing, and regulators are evaluating whether additional regulations are needed for decentralised systems that lack an identifiable issuer or intermediary. The report also flags risks related to lending, borrowing, and staking of crypto-assets, including excessive leverage, information asymmetries, and systemic risks tied to re-hypothecation and collateral chains. This means that CASPs and financial institutions offering these services will likely face greater regulatory oversight, especially concerning transparency, disclosures and risk management. Although no immediate financial stability threats have been identified, the ongoing assessment by the EBA and the ESMA signals that new regulatory measures could emerge. Entities engaged in DeFi, lending and staking should prepare for potential compliance requirements, particularly in terms of consumer protection, reporting obligations and mitigating ML/TF risks.
- The EBA has released a Consultation Paper on draft Regulatory Technical Standards (RTS) outlining the necessary elements for institutions to calculate and aggregate crypto-asset exposures for prudential treatment under the CRR3, as the regulation includes a transitional prudential framework that addresses the treatment of various crypto-assets, taking into account MiCA. The RTS covers aspects like credit risk, counterparty credit risk, market risk and credit valuation adjustment risk for different types of crypto-assets. Institutions must align with these standards to ensure proper capitalisation of their crypto-asset exposures. Additionally, fair-valued crypto-assets under MiCA will need to meet prudent valuation requirements. The consultation is open until 8 April 2025, with a virtual public hearing on 4 March 2025.
- EBA has repealed its Guidelines on major incident reporting under the Payment Services Directive (PSD2) due to the implementation of harmonised incident reporting under the Digital Operational Resilience Act DORA starting from 17 January 2025. This change aims to simplify the reporting process for payment service providers (PSPs) and provide legal certainty. DORA introduces unified incident reporting requirements for financial entities across various sectors, including banking, securities, insurance and pensions, impacting most PSPs such as credit institutions, payment institutions, e-money institutions and account information service providers. For these entities, PSD2 incident reporting requirements are now replaced by DORA's regulations. However, other types of PSPs not covered by DORA, like post-office giro institutions and credit unions, are still subject to PSD2 incident reporting. Despite this, the EBA has repealed the Guidelines entirely due to the minimal number and significance of reports from these institutions, their limited market share and their national-level operations. These PSPs may still be subject to national incident reporting requirements, and competent authorities can choose to retain the approach of the EBA Guidelines under national laws or measures. The overall goal is to ensure a streamlined and coherent reporting process for major incidents.
- The Senate has approved the Act on the digitalisation of the financial market (in Czech only), implementing key European Union regulations, specifically DORA and MiCA. The Act is now awaiting the President's signature and introduces significant changes for financial entities and crypto-asset service providers. Under the new law, providers of services related to crypto-assets will now require licensing from the Czech National Bank (CNB), which will oversee compliance and enforce penalties for breaches. In addition to regulatory oversight (which is which are transposed from DORA and MiCA), the Act includes tax provisions relevant to individuals transacting in crypto-assets. A new time test exempts crypto sales from personal income tax if the assets are held for more than three years, while a value test ensures that transactions up to CZK 100,000 per year do not need to be reported in tax returns. Overall, the new legislation introduces stricter oversight of the financial and crypto sectors, requiring businesses to adapt to licensing requirements, enhanced consumer protection rules and increased digital resilience obligations. The Act should be effective within a few weeks.
- The Czech National Bank (CNB) is set to become the body responsible for carrying out the functions and tasks set out in MiCA under the Act on the Digitalisation of the Financial Market. Once the law comes into force, the CNB will oversee the licensing and supervision of crypto-asset service providers (CASPs) and issuers of crypto-assets, ensuring compliance with MiCA's regulatory framework. This means that any entity involved in issuing, trading or providing services related to crypto-assets will need to adhere to new licensing and reporting obligations under the CNB's supervision. Entities currently operating under a trade licence for virtual asset services must apply for CASP authorisation before 31 July 2025 to continue their operations legally. Those who submit their application within this period may continue their activities until a final decision is made, but no later than 1 July 2026. The CNB will also be responsible for processing notifications and authorisations related to different categories of crypto-assets, including asset-linked tokens (ARTs) and electronic money tokens (EMTs), ensuring their issuers meet the regulatory requirements. Until the law takes effect, the CNB does not have substantive competence to process MiCA-related applications. However, it has signalled its readiness to handle requests as soon as the legislative process is completed.
- The Ministry of Justice aims to streamline processes by, among other things, eliminating the obligation to file motions for injunctions, allowing adjudication in closed sessions and enabling the filing of motions for the settlement of counterclaims. The bill also aims to simplify mediation and settlement agreements to reduce the number of court cases. The government plans to pass it in the second quarter of 2025, with its entry into force expected later this year.
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Kristýna
Tupá
Attorney at Law
czech republic