July 24, 2024
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The EU won’t implement crypto investor protections until late 2024.

As of July 2026, crypto asset service providers in Europe may not fully enjoy the rights and protections accorded to them under MiCA, according to the European Securities and Markets Authority (ESMA). Investors in cryptocurrencies within Europe currently lack protection under the European Union’s cryptocurrency asset market rules, and the implementation of safeguards will take some time. 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), the European crypto regulations.

The ESMA highlighted that the investor protections outlined in MiCA will not be effective until at least December 2024. During this period, investors must be prepared for the possibility of losing the entire amount they intend to invest in crypto. The authority clarified: “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’s no assurance that investors will have full protection under MiCA until 2026. Once MiCA becomes applicable to crypto asset service providers in late 2024, member states retain the option to grant an additional 18-month “transitional period,” commonly known as a “grandfathering clause,” allowing providers to operate without a license. This implies that holders of crypto-assets and clients of crypto-asset service providers may not enjoy full rights and protections under MiCA until as late as July 1, 2026, as mentioned by the ESMA. The supervisory powers of most NCAs during this transitional period are limited, dependent on local laws and often confined to existing anti-money laundering regimes, which are less comprehensive than MiCA. ESMA cautioned retail investors that even with the implementation of MiCA, there is no guarantee of a completely safe crypto asset. MiCA does not comprehensively address all risks associated with these products, and many crypto-assets, by their nature, remain highly speculative. These warnings from the ESMA follow the release of a second consultative paper on MiCA on October 5, following the enforcement of regulations in June 2023. Throughout the MiCA implementation phase, the ESMA and other relevant authorities are engaging with the public on various technical standards, expected to be published in three sequential packages.

Introduced in 2020, MiCA aims to provide legislation regulating crypto assets in Europe by amending existing laws, specifically Directive 2019/1937. The groundwork for MiCA was initiated in 2018 in response to the growing public interest in investing in cryptocurrencies.