Cryptocurrency investors in Europe are not yet protected by the European Union’s cryptocurrency asset market rules, and it will take some time for these protections to take effect.
On October 17, the European securities regulator, the European Securities and Markets Authority (ESMA), released a statement on the transition to the European crypto regulation known as Markets in Crypto-Asset Regulation (MiCA).
ESMA underlines that MiCA-based crypto investor protections won’t take effect until at least December 2024, meaning investors should be prepared to lose any money they plan to invest in crypto. The authority added:
“Crypto-asset holders and clients of crypto-asset service providers will not benefit during this period from any regulatory and supervisory guarantees at EU level (…) such as the possibility of filing complaints formal requests with their NCAs (competent national authorities). against crypto-asset service providers.
Even after December 2024, there is no guarantee that investors will be fully protected by MiCA until 2026. After MiCA becomes applicable to crypto asset service providers at the end of 2024, Member States still have the option to grant providers cryptographic services an additional period of 18 months. transition period” allowing them to operate without a license, also known as a “grandfather clause”.
“This means that holders of crypto-assets and customers of crypto-asset service providers will not be able to benefit from all the rights and protections granted to them under MiCA until July 1, 2026,” wrote the ESMA. Most NCAs will have limited powers to supervise those who benefit from the transitional period, depending on local laws.
“In most cases, these powers are limited to those available under existing anti-money laundering regimes, which are much less comprehensive than MiCA,” ESMA added.
Retail investors should be aware that there will be no safe crypto assets even once MiCA is implemented, the authority stressed, adding:
“ESMA reminds holders of crypto-assets and clients of crypto-asset service providers that MiCA does not take into account all the different risks associated with these products. Many cryptoassets are highly speculative in nature.
During the implementation phase of MiCA, ESMA and other relevant authorities are responsible for consulting the public on a series of technical standards which are expected to be published sequentially in three packages.
Officially introduced In 2020, MiCA aims to provide legislation to regulate crypto assets in Europe by amending existing laws, particularly Directive 2019/1937. The groundwork for MiCA was initiated in 2018 due to growing public interest in investing in cryptocurrencies.
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