March 27, 2024
EU Crypto Investor Protections Delayed Until Late 2024
Latest Cryptocurrency News

EU Crypto Investor Protections Delayed Until Late 2024

Cryptocurrency investors in Europe are currently not protected under the European Union’s cryptocurrency asset market rules, and it will be some time before these protections become effective.

On October 17, the European Securities and Markets Authority (ESMA), Europe’s securities regulator, issued a statement regarding the transition to the Markets in Crypto-Assets Regulation (MiCA), which is a set of European crypto regulations.

ESMA emphasized that the investor protections outlined in MiCA will not take effect until at least December 2024, meaning that investors must be prepared to lose all the money they plan to invest in crypto. The authority added:

“Holders of crypto-assets and clients of crypto-asset service providers will not benefit during that period from any EU-level regulatory and supervisory safeguards […] such as the ability to file formal complaints with their NCAs [National Competent Authorities] against crypto-asset service providers.”

Even after December 2024, there is no guarantee of full protection for investors under MiCA until 2026. After MiCA becomes applicable to crypto asset service providers in late 2024, member states have the option to grant these service providers an additional 18-month “transitional period” during which they can operate without a license, often referred to as a “grandfathering clause.” As a result, crypto-asset holders and clients of crypto-asset service providers may not enjoy the full rights and protections afforded by MiCA until as late as July 1, 2026. The supervisory powers of most NCAs during this transitional period are limited, and they are mainly related to existing anti-money laundering regulations, which are less comprehensive than MiCA.

ESMA emphasized that, even once MiCA is implemented, there is no such thing as a completely safe crypto asset, adding, “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.”

These warnings come shortly after ESMA released a second consultative paper on MiCA on October 5, following the enforcement of the regulations in June 2023. During the implementation phase of MiCA, ESMA, and related authorities are consulting with the public on a range of technical standards that will be published in three packages.

MiCA was introduced in 2020 to provide legislation for regulating crypto assets in Europe by amending existing laws. The initiative to develop MiCA began in 2018 due to the increasing public interest in cryptocurrency investments.

Image by wirestock on Freepik

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