Europe’s crypto investors are currently facing extended uncertainty as regulatory protections mentioned in the Markets in Crypto-Assets Regulation (MiCA) is facing delays. As per the European Securities and Markets Authority (ESMA), MiCA-based investor safeguards won’t come into effect until at least December 2024.
They highlighted in their statement that crypto-asset holders and clients of crypto-asset service providers will remain unprotected under EU’s crypto rules.
There is no guarantee that investors will enjoy complete protection under MiCA, even after December 2024. EU countries have the option to grant crypto service providers an additional 18-month “transitional period,” also known as a “grandfathering clause.” It will allow them to operate without a license.
It means that until July 1, 2026, investors will not benefit from protections under MiCA. The ESMA underscored that most National Competent Authorities (NCAs) will have limited supervisory powers during this transitional period. They will be primarily governed by existing anti-money laundering regimes. However, they are less detailed than MiCA.
MiCa timeline Source: ESMA Reminder of ongoing risks in Crypto market
ESMA’s warning serves is reminder to retail investors that there is no such thing as a safe crypto asset. That statement will stay true even after MiCA’s implementation.
ESMA reminds holders of crypto-assets and clients of crypto-asset service providers that MiCA does not address all of the various risks associated with these products. Many crypto-assets are by nature highly speculative
The ESMA has issued this warning soon after it released MiCa’s second consultation paper on October 5. This was after MiCa was approved in June 2023
On one hand MiCA has been praised for bringing standardization and regulatory clarity to the market. On the other hand, concerns have been raised regarding its impact on innovation and privacy. The one-size-fits-all approach by EU regulators has been criticised because fails to account for the unique features of decentralized systems. It could potentially stifle the growth of crypto projects.
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