The regulatory engagement with crypto assets and the sustainability disclosure and reporting: An oxymoron?

Policy makers and regulators worldwide recognize the pressing need to manage the consequences of climate change and resource depletion. In the European Union, big efforts have been spent in incorporating environmental, social and governance (“ESG”) considerations into the set of rules and requirements underpinning financial market legislation. In particular, the EU erected essential pillars of the sustainability architecture: the Sustainable Finance Disclosure Regulation (“SFDR”) and Taxonomy Regulation, along with the Corporate Sustainability Reporting Directive (“CSRD”) and the Corporate Sustainability Due Diligence Directive (“CSDDD”). As the crypto industry has continued to grow, regulators, investors and other stakeholders are more closely scrutinizing the industry’s impact on the environment. In the EU, the introduction of the Markets in Crypto-Assets Regulation (“MiCAR”) marks an important development in the overall architecture of financial market legislation. In accounting for the environmental impacts of crypto-assets (in particular due to their energy consumption), MiCAR introduces disclosure requirements concerning the principal adverse impacts on the climate and other environment-related adverse impacts of the consensus mechanisms used to issue a crypto-asset, raising question as for the coordination with the SFDR and the CSRD. With this in mind, this Article investigates the sustainability disclosure rules for crypto assets, pointing out the current silos-oriented approach, as resulting from the different regimes triggered from the crypto assets’ taxonomy. Since the legal characterisation of the crypto assets could trigger different regulatory regimes as well as diverse sustainability disclosure rules, this could in fact increase legal uncertainty and consequently the regulatory fragmentation across countries.