ESMA announced that EU digital asset investors won’t have regulatory protections under MiCA until at least December 2024, possibly extending to July 1, 2026.
Key Takeaways:
- ESMA postpones the implementation of investor protections for digital asset holders in the EU.
- MiCA regulatory regime rights and safeguards may not apply until July 1, 2026.
- Holders of crypto-assets are urged to be aware of the risks associated with digital assets.
- ESMA seeks public input on proposed rules related to MiCA and warns of DeFi-related risks.
The European Securities and Markets Authority (ESMA) has announced that digital asset investors in the European Union will not enjoy the protections outlined in the Markets in Crypto Assets (MiCA) regulatory regime until at least December 2024, and possibly not until July 1, 2026.
Assets are under managements
ESMA, serving as the primary rulemaking and oversight authority for MiCA in the EU, released an update on the transition timeline for this groundbreaking regulation.
During this transition period, holders of digital assets will not benefit from EU-level regulatory and supervisory safeguards, nor will they have recourse mechanisms like filing complaints against digital asset service providers.
Furthermore, Member States have the option to grant entities that already provide crypto-asset services an additional 18-month transitional period without requiring a MiCA license.
This could delay the full rights and protections for digital asset holders until as late as July 1, 2026.
ESMA emphasized that during this period, local authorities will have limited powers to supervise unlicensed digital asset service providers, relying mainly on existing anti-money laundering regulations, which are less comprehensive than MiCA.
ESMA: Digital asset investor protections won’t kick in until end of 2024 https://t.co/zKuhIBaPcE
— CoinGeek (@RealCoinGeek) October 20, 2023
The regulator also reminded investors that even with MiCA, crypto-assets remain highly speculative, and there is no such thing as a “safe” crypto-asset.
In a separate announcement earlier this month, ESMA sought public input on proposed MiCA-related rules, covering sustainability indicators, disclosure requirements, technical requirements for white papers, trade transparency measures, and record-keeping for digital asset service providers.
Additionally, ESMA warned of the “serious risks” posed by decentralized finance (DeFi), including issues related to decentralized exchanges and wash trading.
Overall
ESMA’s decision to delay the implementation of investor protections under MiCA highlights the challenges in regulating the rapidly evolving digital asset landscape.
This delay underscores the need for cautious investment and thorough due diligence by individuals involved in the crypto market. As ESMA continues to seek input and address risks in the sector, investors should remain vigilant and informed about the ever-changing crypto environment.
