The European cryptocurrency market is entering a new era of regulation, but investor protection will not happen immediately. MiCA regulations, aimed at introducing rules for crypto assets, will not come into force until the end of 2024, leaving investors without full legal protection for potentially an even longer period.
Despite a sharp increase in interest in cryptocurrencies in recent years, investors in the European Union still find themselves in a space where effective legal protection is more of a promise than a reality. According to recent announcements from the European Securities and Markets Authority (ESMA), the full implementation of MiCA regulations (Markets in Crypto-Assets Regulation) has been postponed until December 2024. This means that those investing their resources in digital assets should be prepared for the risk of losing their invested funds.
Moreover, even after the introduction of MiCA, there is no guarantee of immediate implementation of full protection. Member states will have the opportunity to grant service providers related to cryptographic assets an additional 18-month “transition period.” This will allow them to continue operations without the required license, a concept known as the “grandfather clause.” In practice, this may mean that full legal protection for investors will not be available until July 1, 2026.
This delay in introducing comprehensive regulations has serious implications. During this period, investors will not benefit from any guarantees at the EU level that regulate the activities of cryptographic service providers. During this time, they will not have the opportunity to file formal complaints with national supervisory authorities against digital service providers. In most cases, these authorities will be limited only to the powers available under current anti-money laundering regimes, which are much less comprehensive than MiCA regulations.
ESMA notes that even after the implementation of MiCA, there is no such thing as a “safe” crypto asset. These regulations do not solve all the various risks associated with these products, and many cryptocurrencies are highly speculative by nature. These warnings appear in the context of the growing popularity of investing in cryptocurrencies among the general public, which began as early as 2018, and which led to the introduction of MiCA in 2020 to change existing laws, especially Directive 2019/1937.
In light of all this, it is important for retail investors to be aware that the protection of their investments is not guaranteed, and that they should approach investing in cryptocurrency assets with due caution and awareness of potential risks.
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