A non-EU exchange is not a safe harbour for crypto insider dealing

Consider this scenario: A crypto-asset (e.g. Bitcoin) is admitted to trading on a German MiCAR-authorised platform. A person outside the EU receives precise, non-public information that, if published, would likely have a significant effect on the Bitcoin price. The person then trades on an exchange outside the EU.

MiCAR does not confine its insider-dealing rules to EU residents or EU trading venues. Market-abuse rules are applied to acts by any person, to transactions regardless of whether they take place on a trading platform, and to actions and omissions in both the EU and third countries.

The prohibition to use inside information to buy or sell the relevant crypto-asset, directly or indirectly, for oneself or for another person also covers attempts, cancelling or amending an existing order, and recommending or inducing another person to trade. In Germany, this is not treated merely as a regulatory compliance failure. Section 46 of the German Crypto Markets Supervision Act (KMAG) makes intentional violations punishable by up to five years’ imprisonment or a fine. Attempts are punishable as well.

The harder question is enforcement.

MiCAR requires competent authorities to have extensive investigatory powers, including powers to demand information and documents, seize relevant data, refer matters for criminal prosecution and request the freezing of assets. But those powers must be exercised in accordance with national law. MiCAR’s substantive reach therefore does not give German authorities an independent power to search premises, compel a foreign exchange or arrest a person inside another country.

For third-country cases, MiCAR relies partly on cooperation arrangements between EU authorities and foreign supervisors. The official EU template is explicit about their limitations: such arrangements do not create legally binding obligations and do not override domestic law. Assistance may be refused, for example, where it would require the foreign authority to violate its own law or would interfere with an existing investigation.

ESMA openly recognises these obstacles. Its supervisory guidelines identify foreign laws, difficulties enforcing those laws and problems exchanging or obtaining information from third-country authorities as barriers to effective cross-border supervision. Transactions routed to platforms outside the EU can also impede the use of suspicious transaction and order reports.

But surveillance is not limited to the records of the exchange used by the insider. ESMA expects authorities to draw on public information, order and transaction data obtained from regulated crypto service providers and, where possible, reconciled on-chain, off-chain and cross-market data.

This is also where an enforcement problem can create a travel issue.

Where the applicable national requirements are met and a valid arrest warrant has been issued, the requesting country can ask INTERPOL to publish a Red Notice. A Red Notice is not an international arrest warrant. It is a request to law-enforcement authorities worldwide to locate and provisionally arrest a person pending extradition, surrender or similar legal proceedings. Each country decides under its own law whether to act.

INTERPOL requires, among other conditions, a valid arrest warrant, a serious ordinary-law crime and, where the person is sought for prosecution, an offence carrying a maximum custodial penalty of at least two years. Germany’s crypto insider-dealing offence carries a maximum of five years. Meeting the penalty threshold alone does not guarantee a Red Notice or extradition: the remaining INTERPOL requirements and the law of the country in which the person is located must also be satisfied.

Current difficulties in obtaining evidence or assistance from one country do not make the trade lawful. Nor do they guarantee safe travel. A person who remains beyond effective reach in one jurisdiction may face provisional arrest when entering another jurisdiction that is legally able and willing to act on a warrant or extradition request.

MiCAR insider-dealing prohibition is expressly cross-border even if enforcement may remain uneven across borders.