ESMA Flags Cryptocurrency Links as Potential Risk to Traditional Finance
Europe's top securities regulator, ESMA, has sounded the alarm on growing links between cryptocurrency markets and traditional finance. The European Securities and Markets Authority warned that vulnerabilities in digital-asset ecosystems could contribute to wider financial-system shocks.
The report highlights the 'growing linkage between increasingly vulnerable crypto-asset markets and the broader financial system.' It notes that tokenized equities, although still small globally, are gaining traction in Europe and could change who participates and how markets are structured.
DeFi exploits are also on ESMA's radar as a potential channel through which crypto disruptions could spill into the wider system. Prediction markets are flagged as an emerging concern, with particular focus on insider trading, wash trading, and coordinated manipulation.