ESMA Flags Crypto-Finance Links as EU Market Risk
Europe's main securities watchdog, the European Securities and Markets Authority (ESMA), has flagged links between crypto markets and traditional finance as a growing risk to EU markets. In its latest risk report released on September 10, ESMA warned that tokenized equities, DeFi exploits, and prediction markets could spread crypto shocks into the broader financial system.
Tokenized equities have seen small but rising volumes relative to global stock markets, according to ESMA. While adoption remains limited, the regulator fears it could bring in new participants and reshape market infrastructure over time. This trend deepens ties between crypto and traditional markets, raising regulatory concerns.
Prediction markets also drew a warning from ESMA, as they complicate efforts to detect insider trading, wash trading, and coordinated manipulation. The agency cited the need for regulators to be equipped to address these market integrity issues. ESMA's findings come amidst a parallel dispute in the US over jurisdictional claims related to prediction markets.