Scammers Exploit MiCA Deadline Chaos

Fraudsters Exploit Crypto Firm Shutdowns to Target Customers

Scammers are impersonating European regulators and cryptocurrency exchanges in an effort to defraud customers who are being forced to move their assets as unlicensed firms shut down across the European Union.

Companies that failed to secure a license by the July 1 deadline under the EU’s Markets in Crypto-Assets Regulation (MiCA) are now operating illegally and are required to instruct their customers to withdraw or transfer their holdings. According to the European Securities and Markets Authority (ESMA), the EU’s market watchdog, only 323 firms are listed on its register, which was updated at the end of July. Data provider VASPnet estimated last month that over 1,700 unlicensed companies would have to cease operations.

This situation leaves a significant number of individuals needing to quickly move their funds to unfamiliar providers, a scenario that criminals are actively exploiting. “This moment is an opportunity for scammers more than usual,” Stéphane Pontoizeau, an executive director at France’s market regulator, the Autorité des Marchés Financiers (AMF), told the Financial Times.

The AMF has documented instances where fraudsters have posed as its own staff, directing customers of unlicensed firms to transfer their assets to fraudulent websites. ESMA has acknowledged “fraudulent practices involving the misuse of ESMA’s logo and identity,” including the use of forged documents to promote scams. The Dutch regulator, the Autoriteit Financiële Markten, has advised traders to exercise caution with any third-party requests to move funds and to verify such requests against the official website and app of their provider.

The AMF has opted against setting an aggressive deadline for unlicensed firms operating in France to wind down their operations. The regulator’s reasoning is that creating a sense of manufactured urgency can push individuals into scams. Consequently, it has urged customers to take their time in selecting a replacement provider. Pontoizeau stated that the regulator will refer cases to law enforcement where criminals impersonate the AMF or licensed companies.

MiCA has replaced a fragmented system of national regulations with a single authorization that is valid across all 27 member states. The transition period for this regulation concluded on July 1. Major exchanges such as Coinbase, Kraken, and OKX are among those that have obtained licenses.

Binance, the largest crypto exchange, is among those without a license. The company withdrew its application in Greece in June following reports that the regulator intended to reject it, and stated it would seek approval elsewhere. Spain’s securities regulator ruled out any extensions just days before the deadline.

Chainalysis reported that losses from crypto scams and fraud reached $17 billion last year, a figure based on historical trends, compared to $6 billion five years prior. Impersonation is identified as one of the fastest-growing categories of crypto fraud that the firm tracks.