EU securities watchdog warns investors over crypto market protections

LONDON, Oct 17 (Reuters) – Investors will not be protected by European Union crypto-asset market rules until at least the end of 2024, and even then they should still be prepared to lose all their money , the European Union’s securities watchdog said on Tuesday.

The EU was the first jurisdiction in the world to approve a comprehensive set of rules to regulate markets for cryptoassets like bitcoin, which came into force in June but will not be fully implemented until December 2024.

Crypto regulation has become more urgent for regulators after the collapse of crypto exchange FTX and with enormous volatility in Bitcoin prices.

Cryptoassets are currently not regulated by EU securities rules, and the European Securities and Markets Authority (ESMA) has said that investors will not benefit from any regulatory and supervisory guarantees at the level of the EU or appeal mechanisms under the new rules, known as MiCA, before December 2024.

“Even with the implementation of MiCA, retail investors should be aware that there will be no ‘safe’ cryptoassets,” the EU watchdog said in a statement.

“Can you afford to lose all the money you plan to invest? ESMA said, adding that cryptoassets were subject to “new operational and security risks.”

Full protections may not be available in EU states that grant an 18-month transition period for crypto businesses to operate without an EU license, meaning customers may not be covered until July 2026.

A significant number of crypto companies will likely continue to offer their services under the transitional conditions until mid-2026, ESMA said.

Third-country crypto companies will be allowed to provide services to block customers who have specifically requested them, and even then only on a “strictly limited” basis.

“While this exemption is subject to further guidance from ESMA, it must be understood to be very narrowly framed and as such must be considered the exception; and it cannot be alleged, nor exploited to circumvent MiCA,” ESMA said.

The watchdog said it was working with national regulators to encourage convergence in the application of MiCA rules as quickly as possible so that businesses understand that the EU is not a place for “forum shopping or illicit practices”.

Reporting by Huw Jones; Editing by Emelia Sithole-Matarise

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