European Crypto-Investor Protections Delayed Until at Least December 2024, Warns ESMA
Summary:
European cryptocurrency investors currently lack protection under the EU's cryptocurrency market regulations, known as Markets in Crypto-Assets Regulation (MiCA). The EU's securities regulator, the European Securities and Markets Authority (ESMA) stated that these regulations won't take effect until at least December 2024. Even after this date, there is no guarantee investors will be fully protected until potentially as late as 2026. The ESMA highlighted that after MiCA regulations apply to crypto service providers in December 2024, states can permit a further 18-month "transitional period" without a license. Retail investors were warned that there would be no "safe" cryptocurrency even after MiCA's implementation due to the speculative nature of these assets.
Investors in digital currencies in Europe currently do not have safeguarding provisions under the European Union’s cryptocurrency market regulations; this protective cover will take a bit of time before it materializes. The European Securities and Markets Authority (ESMA), which oversees securities in Europe, issued a missive on October 17 in regard to the transition toward the European Union’s digital currency regulations, known as the Markets in Crypto-Assets Regulation (MiCA). The ESMA underlined that investor safeguards under the MiCA will not be implemented until December 2024 at the earliest, implying that those investing in digital currencies must be prepared to possibly lose their entire investment. The ESMA commented that during this period, holders of digital currencies as well as clients of these currency service providers will not have access to EU-level regulatory and oversight protections, such as lodging official complaints with their respective National Competent Authorities (NCAs) against these providers. Besides, there’s no assurance that post 2024, investors will be fully sheltered under MiCA until 2026. After MiCA provisions come into effect for digital currency service providers in December 2024, member states have the right to allow these providers an 18-month leeway to function without a licence; this is colloquially referred to as a “grandfathering clause." The ESMA penned, "Investors of digital currencies and clients of these currency service providers may not enjoy the complete rights and protections under MiCA until possibly as late as July 1, 2026." The powers of the vast majority of NCAs to oversee those within the leeway period will be restricted and will depend on local legislation. "In the majority of cases, these oversight powers are limited to those under existing anti-money laundering rules, which are far less exhaustive than MiCA," added ESMA. Retail investors must comprehend that even post-implementation of MiCA, there won't be something like a risk-free digital currency, as per the ESMA; it noted that MiCA does not encompass all the diverse risks tied to such products since many digital currencies are inherently speculative by nature. These cautionary guidelines from the ESMA follow its issuance of a second consultative paper on MiCA on October 5, after the enforcement of these regulations in June 2023. This phase of the MiCA’s roll out will involve the ESMA and similar authorities seeking public consultation on a series of technical norms, expected to be rolled out sequentially in three lots. Launched officially in 2020, MiCA’s objective is to regulate digital currencies in Europe by modifying existing laws, notably Directive 2019/1937. MiCA’s infrastructure was laid out in 2018 in response to rising public interest in investment in digital currencies.
Published At
10/17/2023 1:15:57 PM
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