Crypto Firms Urge EU For Extended Compliance Deadline Under MiCA

According to DLNews, crypto businesses may face suspension of services in the European market, valued at nearly $1 trillion, unless they are granted additional time to comply with the European Union's new Markets in Crypto-Assets (MiCA) regulation. A letter addressed to the European Securities and Markets Authority (ESMA) by several crypto and blockchain trade associations warns that without an extension, the market's reputation and customer interests could be at risk. The letter, from the European Crypto Initiative, Blockchain for Europe, the Electronic Money Association, and the International Association for Trusted Blockchain Applications, highlights potential negative financial impacts across EU member states if compliance is not achieved in time. The next phase of MiCA's implementation is scheduled for December 30, introducing new regulations for crypto asset service providers (CASPs), including exchanges, wallet providers, and custodians. While these regulations are seen as a catalyst for the crypto industry's growth in Europe, industry representatives express concerns over the perceived slow response from regulators, which may hinder their ability to capitalize on this opportunity. ESMA recently finalized the implementing rules of MiCA, which detail the compliance requirements for individual state regulators and crypto firms. However, CASPs cannot authorize firms until they receive ESMA's rules, which were submitted to the European Commission on October 16 and endorsed on October 31. This leaves EU state regulators with limited time to publish their authorization requirements and approve firms by the December 30 deadline. MiCA offers a grace period of up to 18 months for firms to transition from existing local CASP regulations to MiCA. However, the trade associations argue that this grace period is insufficient, as crypto firms may still need to cease cross-border services. MiCA allows individual countries to select different grace periods, up to the 18-month limit. Some states, like Denmark, France, and Greece, have opted for the full 18 months, while others, such as Ireland, chose 12 months, and Lithuania only five months. The lengthy application process, involving extensive paperwork, further complicates the timeline for authorizations, potentially extending beyond many countries' grace periods. The letter emphasizes the threat to MiCA's passporting provisions, which allow CASPs authorized in one state to offer services across the EU. The trade associations urge ESMA to extend the grace period for MiCA authorization to the end of June, which would reduce regulatory uncertainty and enable CASPs to continue services while applications are processed. Vyara Savova, a senior policy expert with the European Crypto Initiative, suggests that ESMA could also address the issue by advising member states to harmonize their timelines and extend their grace periods. ESMA has not yet responded to the request for comment.