The European Securities and Markets Authority (Esma) has cautioned investors about the risks of the cryptoasset market.
Protection under the European Union’s cryptoasset market regulations won’t be in place until at least the end of 2024. Even with these regulations active, investors should anticipate the potential to lose their entire investment, said Esma.
The EU, having pioneered a comprehensive set of rules for cryptoassets, won’t fully implement these regulations until December 2024. The need for such regulations has been highlighted by events like the collapse of the FTX crypto exchange and substantial bitcoin price volatility.
Currently, crypto assets aren’t regulated under EU securities rules, meaning investors won’t have the EU-level regulatory safeguards or recourse mechanisms until the new MiCA rules take effect in December 2024.
The EU watchdog emphasised that no cryptoasset can be considered entirely safe for retail investors and highlighted the inherent operational and security risks in the sector.
“Even with the implementation of MiCA, retail investors must be aware that there will be no such thing as a ‘safe’ crypto asset,” the EU watchdog said.
Additionally, some EU states might allow an 18-month transitional period for crypto firms to operate without an EU license, potentially extending full protection commencement to July 2026.
Esma also indicated limited conditions under which non-EU crypto firms can serve EU customers, stressing the importance of these restrictions to prevent regulatory circumvention. The authority is working closely with national regulators to ensure a harmonized application of the rules.
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