Cryptocurrency investors in Europe are not yet protected by the European Union's cryptocurrency asset market rules and it will take some time for the protections to take effect.
Europe's securities regulator, the European Securities and Markets Authority (ESMA), on October 17 issued a statement regarding the transition to European crypto regulations known as Markets in the regulation of cryptoassets (Mica).
ESMA emphasized that MiCA-based cryptocurrency investor protections will not go into effect until at least December 2024, meaning investors should be prepared to lose all the money they plan to invest in cryptocurrencies. The authority added:
“Holders of cryptoassets and clients of cryptoasset service providers will not benefit during that period from any regulatory and supervisory safeguards at EU level. [...] such as the ability to lodge formal complaints with their NCAs [National Competent Authorities] against cryptoasset 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 cryptoasset service providers at the end of 2024, member states still have the option to grant cryptoasset service providers an additional 18 months “transition period” allowing them to operate without a license, also known as the “grandfather clause.”
“This means that holders of cryptoassets and clients of cryptoasset service providers may not benefit from all the rights and protections granted to them by MiCA until July 1, 2026,” ESMA wrote. Most NCAs will have limited powers to supervise those who benefit from the transition 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 the MiCA," ESMA added.
Retail investors should be aware that there will be no “safe” crypto asset even once MiCA is implemented, the authority emphasized, stating:
“ESMA reminds cryptoasset holders and clients of cryptoasset service providers that MiCA does not address all the various risks associated with these products. “Many cryptoassets are by nature highly speculative.”
ESMA's latest warnings come shortly after the regulator published a second consultation document at MiCA on October 5 after enforcing the regulations in June 2023.
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During the implementation phase of MiCA, ESMA and other related authorities are responsible for consulting with the public on a variety of technical standards that are expected to be published sequentially in three packages.
Officially inserted In 2020, MiCA aims to provide legislation to regulate crypto assets in Europe by amending existing laws, specifically Directive 2019/1937. Preliminary work on MiCA began in 2018 due to growing public interest in investing in cryptocurrencies.
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