The European Union's new rules for cryptocurrency exchanges start on December 30, 2024. However, delays from regulators mean that states and companies have only a few weeks to get the necessary licenses. This situation raises concerns about the future of crypto trading in Europe.
Crypto businesses may have to stop their services in the nearly $1 trillion European market unless they get more time to comply with the EU’s Markets in Crypto-Assets (MiCA) regulation. A group of trade associations sent a letter to the European Securities and Markets Authority (ESMA) warning that without additional time, the market's reputation and customer trust could suffer.
The letter, reviewed by DL News, states that failing to meet the compliance timeline could hinder users' ability to trade. It warns of serious consequences for customers across all EU member states. The signatories include the European Crypto Initiative, Blockchain for Europe, and several other organizations.
As the next phase of MiCA rolls out, new rules will apply to crypto asset service providers (CASPs), including exchanges and wallet providers. While many see these new laws as essential for growth in the crypto industry, representatives worry that slow regulatory processes could prevent them from taking advantage of new opportunities.
Recently, the EU finalized the implementing rules for MiCA, which detail the requirements for state regulators and crypto firms. Each CASP must be authorized by its local regulator under MiCA. This process involves a lot of paperwork and compliance checks.
Once a CASP gets authorized in one EU state, it can operate across the entire bloc. This is a major benefit known as MiCA’s passporting provision. However, CASPs can’t start authorizing companies until they receive the rules from ESMA. The regulator submitted these rules to the European Commission on October 16, and they were endorsed on October 31. This timeline leaves state regulators with only a few weeks to set their authorization requirements and approve firms before the December 30 deadline.
MiCA does allow for a transition period of up to 18 months for companies to adapt from existing local regulations. However, trade associations argue that this grace period may not be enough. Some countries could still force crypto firms to halt cross-border services. MiCA lets individual countries choose different grace periods within the 18-month limit. For example, Denmark, France, and Greece opted for the full 18 months, while Ireland chose 12 months, and Lithuania only five months.
The application process takes time and involves a lot of documentation. Because ESMA finalized the rules late, the timeline for authorizations may stretch beyond many countries' grace periods. For instance, a firm in Poland that completes its application by May 2025 may still have to stop operations in Lithuania if that country's grace period has expired. This situation threatens the effectiveness of MiCA’s passporting provisions, which are a key advantage for CASPs.
Lobbyists are urging ESMA to extend the authorization grace period for MiCA to the end of June. “This would reduce regulatory uncertainty and allow CASPs to continue services while applications are being processed,” said Vyara Savova, a senior policy expert with the European Crypto Initiative. Savova also suggested that ESMA could help by asking member states to align their timelines and extend their grace periods. ESMA has not yet responded to requests for comment.