Crypto investor protections won’t go into effect in the EU until the end of 2024.

Cryptocurrency investors in Europe are not yet protected by EU crypto asset market rules, and it will take some time for the protections to take effect.

On October 17, the European securities regulator, the European Securities and Markets Authority (ESMA), issued a statement regarding the transition to European crypto regulations, known as Markets in Crypto-Assets Regulation (MiCA).

ESMA emphasized that MiCA-based crypto investor protections will not take effect until December 2024, meaning investors should prepare to lose all the money they plan to invest in crypto. The official added:

“The owners of crypto-assets and the clients of crypto-asset service providers will not benefit from any EU-level regulatory and regulatory protections during that period. […] Ability to file formal complaints with NCAs [National Competent Authorities] On crypto-asset service providers.

Even after December 2024, there is no guarantee that investors will be fully protected by MiCA until 2026. If MiCA comes into effect for crypto asset service providers at the end of 2024, member states still have the option to grant crypto service providers an additional 18-months. “transitional period” that allows them to work without a license, also known as the “grandfather clause”.

“This means that owners of crypto-assets and clients of crypto-asset service providers may not benefit from the full rights and protections granted under MiCA until 1 July 2026,” ESMA wrote. Most NCAs will have limited jurisdiction over beneficiaries from the transition period, depending on local laws.

“In most cases, these powers are limited to those under the existing anti-money laundering framework, which is much less extensive than the MCA,” ESMA added.

Retail investors should be aware that even once the MCA is implemented, there will be no safe crypto asset, the official stressed.

“ESMA reminds clients of crypto-assets and crypto-asset service providers that the MCA does not address all the various risks associated with these products. Many crypto-assets are highly speculative in nature.

ESMA's latest warnings come shortly after the regulator released a second consultation paper on MiCA on 5 October, after the rules come into effect in June 2023.

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During the MiCA implementation phase, ESMA and other relevant authorities are responsible for consulting the public on the various technical standards that are expected to be published in three packages sequentially.

Officially introduced in 2020, the MCA aims to provide legislation for the regulation of crypto-assets in Europe by amending legislation, in particular Directive 2019/1937. The MiCA foundation was launched in 2018 due to the growing public interest in investing in cryptocurrencies.

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