The European Securities and Markets Authority (ESMA) has announced that investors in the European Union (EU) will not receive protection under the EU’s crypto asset market rules until the end of 2024. Despite being the first jurisdiction to introduce a comprehensive set of regulations for crypto assets, including cryptocurrencies like Bitcoin and Ether, these rules will not come into full effect until December of the following year.
In a separate development, the finance ministers from the Group of 20 (G20) nations adopted a roadmap for regulating crypto assets, as proposed by the Financial Stability Board (FSB) and the International Monetary Fund (IMF) during their meeting in Morocco on October 13.
At present, crypto assets remain unregulated under EU securities rules. ESMA has emphasized that investors will not be covered by EU-level regulatory protections under the new rules, referred to as the Markets in Crypto Assets (MiCA), until December 2024.
ESMA issued a statement cautioning investors and highlighting the absence of a “safe” crypto asset, stating, “Even with the implementation of MiCA, retail investors must be aware that there will be no such thing as a ‘safe’ crypto asset.” The statement urged investors to consider their risk tolerance and readiness for potential losses.
ESMA also outlined the timeline for MiCA and encouraged market participants to prepare for the transition. The MiCA regulations aim to enhance safeguards for crypto asset holders and other stakeholders not currently covered by existing regulations. ESMA clarified that MiCA rules related to the provision of crypto asset services will not take effect until December 2024.
During this transitional period, entities may continue to operate without a MiCA license. As a result, crypto asset holders may not benefit from all the provisions of MiCA until as late as July 1, 2026.
ESMA issued a series of critical questions for potential investors to consider when dealing with crypto assets, including their ability to bear potential losses, readiness for high-risk investments, understanding of crypto asset features, assessment of the reputation and regulatory status of the entities involved, and the ability to secure the devices used for crypto asset transactions, including private keys.
The delay in full regulatory implementation underscores the challenges and complexities surrounding the regulation of crypto assets at the EU level, as authorities strive to strike a balance between investor protection and fostering innovation in the crypto industry.
