“Even with the implementation of Mica, retail investors must be aware that there will be no such thing as a ‘safe’ crypto-asset,” read a from the European Securities and Markets Authority on Tuesday 17 October with regards to the impending implementation of the markets in crypto-assets regulation. The EU rules have reverberated through the crypto industry, and has ignited discussions among industry experts, highlighting the balance between streamlining crypto-asset operations in Europe and addressing the inherent risks in the sector.
Slated for enforcement by December 2024, Mica is poised to unify crypto-asset issuance, trading and services rules. While the core aim of this regulation is to ensure a streamlined approach, Esma was quick to underline that numerous crypto-assets, despite this regulatory umbrella, will remain speculative. Consequently, no crypto-asset can ever be seen as truly ‘safe.’
A notable provision within Mica is the latitude granted to member states in sanctioning entities that offer crypto-asset services. These entities can offer an 18-month ‘transitional period’ to operate without needing a Mica license, clarified Esma.
This means that the full protections enshrined under Mica might remain out of reach for users until potentially 1 July 2026. During this interval, most national regulators will exert limited supervision over these entities, with their authority largely confined to the prevailing anti-money laundering statutes.
Furthermore, Esma underscored the imperative for regulators to allocate resources judiciously for the effective deployment of Mica. They highlighted the importance of setting up authorisation protocols, circulating information about authorisation requisites, and closely tracking entities that might be surreptitiously delivering crypto-asset services.
In response to Esma’s announcement, Emilie Allaert, head of Luxembourg Blockchain Lab, remarked, “The statement is a sign that Esma is committed to ensuring that the market is safe, fair and transparent. However, the grandfathering period, even if welcomed by institutions, should not be considered as a path to favour in terms of compliance with the regulations.” She also proposed that this implementation phase be utilised to upgrade employee skills and bolster investor awareness. “In order to maintain the competitiveness of the European Union in the digital assets field, this implementation should be done in the quickest timeframe possible,” Allaert concluded.
Sharing his perspective, Chris Hollifield, head of business development at Luxembourg for Finance, voiced his approval of Mica. He mentioned, “Mica represents an important step forward for the industry by bringing crypto-assets for the first time within a regulatory perimeter. It is the first major regulatory regime not only in Europe but worldwide that does so.” Hollifield noted Esma’s transparency regarding Mica’s rollout and affirmed Luxembourg’s robust financial infrastructure. He forecasted, “Under the new regime, crypto service providers that are committed to service quality, good governance and regulatory compliance will find Luxembourg to be an excellent environment to develop their European and global business.”
However, offering a more cautionary viewpoint, Jesus Pena Garcia, vice president at Damco Solutions and president of Luxembourg House of Web3, observed that while Mica fortifies safeguards for crypto-asset holders, it is also important to mention that Mica does not address all the risks associated with crypto-assets, and holders of crypto-assets should always exercise caution and thoroughly understand the products and risks.” Garcia advocated for investor vigilance and touted the role of communities like the Luxembourg House of Web3 in aiding individuals and businesses navigate the multifaceted world of crypto.
Mirroring Esma’s viewpoint, Garcia added, “It is important for market participants to begin preparing for the transition; there seems a short time for all the adoption needed from a custody and daily operations point of view.”