The Cyprus Securities and Exchange Commission (CySEC) on Tuesday forwarded a joint warning from the European Supervisory Authorities (EBA, EIOPA and ESMA) cautioning consumers about the risks associated with crypto-assets and the limited legal protection available to investors under the new EU regulatory framework.

The supervisory bodies issued the statement to remind the public that crypto-assets remain high-risk products, with protection depending heavily on the type of asset and whether the service provider is authorised in the European Union.

The warning was accompanied by an explanatory factsheet, titled Crypto-assets explained: What MiCA means for you as a consumer, outlining how the Markets in Crypto-Assets Regulation (MiCA) affects EU investors and what safeguards are available.

MiCA, which came into force in December 2024, sets out harmonised rules for crypto-asset activities across the bloc and establishes a consistent supervisory regime for issuers and service providers at both national and European levels.

While regulators acknowledge that innovative financial products can boost the EU’s competitiveness and resilience, they emphasised that not all crypto-assets are the same, and many fall outside the scope of MiCA. As a result, consumers’ protection “may be limited depending on the types of crypto-assets and services they are using,” the authorities stated.

The ESAs urged consumers to act with caution and ensure they understand the products and risks before investing, verify that providers are authorised in the EU, and secure their digital wallets to safeguard their holdings.

These recommendations come amid growing public interest in crypto-assets, often fuelled by aggressive social media marketing and so-called “finfluencers”.

The joint factsheet further explained that crypto-assets are digital representations of value or rights that can be stored and transferred electronically, typically using blockchain or distributed ledger technology.

It clarified that MiCA regulates three main categories of crypto-assets. The first are electronic money tokens (EMTs), which aim to maintain a stable value by referencing an official currency such as the euro or the dollar. Holders of these tokens are entitled to redeem them at full value in the referenced currency.

The second are asset-referenced tokens (ARTs), which maintain value by referencing one or more assets such as currencies or commodities. These may be redeemed at the market value of the assets they reference.

The third category, utility tokens, provides access to a specific good or service offered by the issuer but do not constitute currency or investment instruments.

The document also highlighted that only authorised entities, such as credit or e-money institutions, can offer EMTs or ARTs to the public or seek their listing on EU exchanges.

In addition, it showed that at the time of publication, no crypto-asset service providers (CASPs) have been authorised by the Central Bank of Cyprus under MiCA.

Consumers can verify whether a crypto-asset provider is authorised by checking the ESMA register or visiting the websites of national regulators such as CySEC and the Central Bank of Cyprus.

However, the ESAs warned that even with MiCA in place, many firms offering crypto-related services remain unauthorised.

Such firms, particularly those based outside the EU, may not follow any consumer protection rules or governance standards.

This exposes users to greater risks of fraud, mismanagement of assets, insolvency, and data breaches.

“If you choose to engage with unauthorised providers, be aware that you may be exposing yourself to significant risks and have limited or no consumer protection rights at all,” the authorities said.

They cautioned that investors dealing with unregulated firms could lose their funds entirely, face difficulties in recovering assets, and be left without legal recourse in the event of disputes.

The EBA also reiterated that crypto-assets remain highly volatile, often unsuitable for retail investors as a form of investment, payment, or exchange.

According to the authority, “the value of most crypto-assets can fall and rise quickly over short periods of time,” adding that consumers “may lose a lot, or even all, of the money invested.”

Other risks include liquidity constraints that make it difficult to sell holdings, misleading information on social media, and a proliferation of fraudulent schemes and hacks aimed at scamming investors.

The EBA reminded consumers that even under MiCA, protections for crypto-asset holders are not as extensive as those for traditional financial products, meaning that investors may not benefit from compensation schemes if things go wrong.

A transitional period will remain in effect until July 2026, during which some firms may operate under national laws until they obtain MiCA authorisation. The ESAs stressed that consumers using services during this period will not benefit from MiCA’s protections.

The authorities encouraged the public to consult official sources such as the ESMA register and CySEC website to confirm the legitimacy of providers and to stay informed about evolving regulatory safeguards.

As CySEC continues to circulate such EU-level warnings, the emphasis remains on raising awareness among Cypriot consumers about the evolving crypto landscape and the importance of vigilance when engaging with digital assets.