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The European Securities and Markets Authority (ESMA) has clarified the timing of the implementation of the Cryptocurrency Regulation Actin the European Union (MiCA) and warned investors about the risks of investing in digital assets.
According to ESMA, the law will notfully implemented by December 2024. At the current stage of its implementation, investors will not be able to benefit from full legal remedies. However, even after coming into force, MiCA will not be able to eliminate various risks associated with cryptocurrency products, the regulator assures. Retail investors should be aware that there is no such thing as a “safe crypto asset.” Many cryptoassets are speculative in nature and therefore subject to new operational or security risks, the agency warned.
“The entry into force of MiCA will bea fundamental event for the creation of a unified set of rules that will regulate the issuance of crypto assets, trading and the provision of cryptocurrency services. Such activities are currently not regulated by European Union financial services legislation,” ESMA said.
The regulator also called on crypto market participantsprepare in a timely manner for the entry into force of the law. Companies providing cryptocurrency services in the EU should contact regulators in the jurisdictions in which they operate to discuss compliance requirements to continue doing business.
ESMA noted that even after MiCAwill apply to cryptoasset service providers, they will be given an additional “transition period” of 18 months during which they can continue to operate without a license under MiCA. This means that cryptocurrency holders and clients of virtual asset service providers will not be able to rely on legal protection under MiCA until July 1, 2026.
Let us recall that last year ESMA advocated a complete ban on cryptocurrency mining using the Proof-of-Work (PoW) consensus algorithm due to the growing electricity consumption.
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