ESMA Flags Growing Crypto Ties as Financial System Risk
Europe's top securities regulator has sounded an alarm about growing ties between traditional finance and cryptocurrencies. The European Securities and Markets Authority (ESMA) warned in its latest risk monitoring report that increasing links between crypto-asset markets and the broader financial system could amplify risks.
The regulator pointed to tokenized equities, which are still negligible compared to global stock markets but gaining traction, as a potential source of instability. Tokenized equities can introduce new participants and infrastructure that reshape market structure.
ESMA also highlighted decentralized finance (DeFi) exploits and prediction markets as emerging risks. The agency warned about heightened concerns around insider trading and market manipulation in prediction markets, where crypto use can make it harder to detect such activities.