ESMA encourages preparations for a smooth transition to MiCA

ESMA has issued a call for preparations to ensure a seamless transition to MiCA, which represents a new regulatory framework for crypto-assets within the EU. In addition, ESMA’s Chair, Verena Ross, addressed a letter to ECOFIN, emphasizing the need for timely actions.
ESMA’s primary concerns revolve around two key areas:
First, the authority urges EU Member States to promptly designate the NCAs responsible for enforcing MiCA’s functions. They also emphasize the importance of granting these authorities sufficient powers and resources to oversee the crypto-asset market effectively.
Second, ESMA expresses reservations about the optional “grandfathering“ clause, which allows entities providing crypto-asset services to continue operating under national laws for an extended period. To mitigate the risk of divergent rules across Member States, ESMA suggests that countries consider limiting the duration of this clause to a maximum of twelve months.
ESMA also acknowledges that while MiCA is a significant step forward in regulating crypto-assets, it does not provide the same level of investor protection as traditional financial products. Therefore, consumer awareness is crucial. ESMA encourages market participants to prepare for the MiCA transition, ensuring their clients understand the regulatory status of their crypto-asset offerings. Additionally, ESMA reminds consumers of the risks associated with crypto-assets, both before and after MiCA’s full implementation, emphasizing the speculative and sometimes novel risks involved.
Furthermore, ESMA clarifies that MiCA will not fully come into effect until December 2024. During the implementation phase, crypto-asset holders and clients of service providers will not have the same regulatory safeguards as traditional financial products. ESMA aims to promote supervisory convergence, ensuring that EU Member States follow a consistent approach to implementing MiCA. They stress that this uniformity will minimize regulatory arbitrage and create a level playing field across the EU.