Key Highlights

  • The French regulator ESMA has reported that its logo is being misappropriated in fake documents to facilitate scams, particularly after the MiCA registration deadline passed.
  • Over 1,700 unlicensed firms need to cease operations in the EU, while only 323 have successfully obtained a MiCA license.
  • According to Chainalysis, losses from crypto scams reached $17 billion last year, a significant increase from $6 billion in 2020.

In a troubling trend, scammers are masquerading as European regulators and cryptocurrency exchanges to defraud individuals affected by the shutdown of unlicensed firms, as reported by various watchdogs throughout the EU to the Financial Times.

Firms that failed to secure a license under the EU's Markets in Crypto-Assets Regulation by the July 1 deadline are now operating unlawfully and are obligated to inform clients to withdraw or relocate their assets. The European Securities and Markets Authority (ESMA) updated its register at the end of July, revealing that only 323 firms were compliant, while data provider VASPnet estimated that over 1,700 unauthorized companies are required to halt operations.

This situation has left many individuals scrambling to transfer their funds to unfamiliar providers, creating an ideal environment for scammers. "This period presents a heightened opportunity for fraudsters," stated Stéphane Pontoizeau, executive director at France's Autorité des Marchés Financiers (AMF), in an interview with the FT.

The AMF has reported instances where fraudsters have impersonated its staff, instructing clients of unlicensed firms to send their assets to a fraudulent website. ESMA acknowledged that it is aware of "fraudulent activities involving the misuse of ESMA's logo and identity," including fake documents that promote scams. The Dutch regulator, the Autoriteit Financiële Markten, advised traders to approach any third-party fund transfer requests with skepticism and to confirm them against the official website and app of the provider.

In light of these developments, the AMF has opted not to set a strict deadline for the wind-down of unlicensed firms in France, explaining that creating an artificial sense of urgency could lead to more individuals falling victim to scams. Instead, they have encouraged customers to take their time when selecting a new provider. Pontoizeau indicated that the regulator will report any cases of impersonation involving its identity or that of licensed companies to law enforcement authorities.

Background on MiCA Implementation

The Markets in Crypto-Assets Regulation (MiCA) aims to unify various national regulations into a single authorization framework applicable across all 27 EU member states, with its transition period concluding on July 1. Notable companies such as Coinbase, Kraken, and OKX have received licenses under this regulation.

Binance, the largest firm yet to obtain a license, withdrew its application in Greece in June after indications that it would be rejected, announcing its intention to seek approval in other jurisdictions. Just days before the deadline, Spain's securities regulator confirmed that no extensions would be granted.

Chainalysis estimates that losses from crypto scams and fraud surged to $17 billion last year, based on historical data, compared to $6 billion five years prior. Impersonation scams have emerged as one of the fastest-growing categories tracked by the firm.