Cryptocurrency investors in Europe are facing a prolonged wait for the implementation of crucial protections, as per the latest statement from the European Securities and Markets Authority (ESMA).

Transition Period

The ESMA highlighted the delay in the enforcement of the Markets in Crypto-Assets Regulation (MiCA), stating that the full spectrum of crypto investor protections won’t be in effect until at least December 2024. This means investors should brace themselves for potential risks until the regulations are fully operational.

Until December 2024, holders of crypto-assets and clients of crypto-asset service providers will lack EU-level regulatory and supervisory safeguards. The ESMA emphasized that during this period, filing formal complaints with National Competent Authorities (NCAs) against crypto-asset service providers will not be an option.

Even after the initial enforcement in December 2024, there’s no guarantee of full protection under MiCA until as late as July 1, 2026. The ESMA explained that member states can opt for a transitional period, commonly referred to as a “grandfathering clause,” granting crypto service providers an additional 18 months to operate without a license.

Limited NCA Powers: Risks During Transitional Period

During the transitional period, NCAs will have limited powers to supervise crypto service providers, relying on existing anti-money laundering regimes, which are less comprehensive than MiCA.

ESMA emphasized that even with the implementation of MiCA, retail investors should recognize that crypto assets remain inherently speculative. MiCA does not address all risks associated with these products.

ESMA Warnings Post-Consultative Paper Release

The ESMA’s recent warnings follow the release of a consultative paper on MiCA on Oct. 5, following the enforcement of regulations in June 2023.

During the MiCA implementation phase, the ESMA and related authorities are engaging with the public on various technical standards. These standards will be published in three packages, outlining the regulatory framework for crypto assets.

MiCA’s Origin and Purpose

Introduced in 2020, MiCA aims to regulate crypto assets in Europe by amending existing laws, specifically Directive 2019/1937. The initiative, stemming from growing public interest in cryptocurrency investments, began in 2018.

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