- EU rules regarding crypto exchanges will come into force on December 30.
- The regulator’s delays give states and businesses just weeks to obtain a license.
- The industry warns that this would jeopardize cryptocurrency trading across Europe.
Crypto firms will be forced to suspend their services in a European market worth almost $1 trillion unless they are given more time to comply with new European regulations on crypto markets. crypto-assets.
That’s according to a letter sent to the European Securities and Markets Authority by a group of crypto and blockchain trade associations who warn that unless given more time to comply, the reputation of the market and customers will suffer.
Failure to do so would jeopardize users’ ability to transact business and result in “serious harm to customers and negative financial consequences in all EU member states”, the European Initiative letter on cryptography, Blockchain for Europe, the Electronic Money Association and the International Association. for trusted Blockchain applications.
The letter, seen by DL Newscomes as the next stage of MiCA’s phased rollout is set to take effect on December 30. This will establish new rules for crypto asset service providers, or CASPs, such as exchanges, wallet providers and custodians.
While the new laws have been hailed as driving the next stage of growth for the crypto industry across Europe, industry representatives fear that a perceived slow pace on the part of regulators means that ‘they will not be ready to exploit this opportunity.
What is it about?
The EU’s market watchdog has only recently finalized the rules for implementing MiCA. These are the finer details of MiCA that individual national regulators and crypto companies must follow to comply with the crypto framework.
The next step in MiCA’s phased rollout concerns its rules for crypto asset service providers, or CASPs, such as exchanges, wallet providers and custodians.
PSAPs in each EU state must be authorized under MiCA by their local regulator. It’s a process that involves tons of paperwork and documentation sent to regulators.
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However, this gives PSAPs a big advantage: once licensed in one state, they can offer their services across the bloc. These are called the MiCA passport provisions.
But PSAPs cannot license companies until they get the rules from ESMA. The regulator submitted these rules to the European Commission on October 16.
The commission approved them on October 31. That left EU state regulators with just weeks to publish their licensing requirements and approve companies in time for the Dec. 30 deadline, the letter said.
Grace period
MiCA provides a grace period of up to 18 months for businesses to transition from outgoing local CASP regulations to MiCA.
However, trade associations have warned, this grace period is not of much help and crypto companies may still have to shut down their cross-border services.
Indeed, MiCA allows each country to choose different grace periods up to this limit of 18 months.
Some states, such as Denmark, France and Greece, have opted for a full 18-month period. Others, like Ireland, have opted for a duration of 12 months, and others, like Lithuania, for only five months.
The problem ? Applications take time because they involve a lot of paperwork. And because ESMA developed the rules so late, this realistically pushes the authorization deadline beyond many countries’ grace periods.
Take a company in Poland that also offers services in Lithuania. It may have fully processed its application in Poland by May 2025, but will still have to close its doors in Lithuania as that country’s grace period has expired.
This poses a big threat to the passport rules, MiCA’s main selling point for PSAPs, the letter said.
Solutions
Lobbyists are calling on ESMA to extend the grace period for MiCA authorization until the end of June.
“This would alleviate regulatory uncertainty, allowing PSAPs to continue their services while applications are processed,” Vyara Savova, senior policy expert at the European Crypto Initiative, told DL News.
Savova said ESMA could also solve the problem by asking member states to harmonize their deadlines and extend their grace periods.
ESMA did not respond to a request for comment.
Joanna Wright is regulatory correspondent for DL News. Contact us at joanna@dlnews.com
