ESMA Sounds Alarm on Crypto-Traditional Finance Link
The European Securities and Markets Authority (ESMA) has issued a warning about the growing ties between cryptocurrency markets and traditional finance. The regulator says that as crypto assets become more intertwined with traditional financial systems, the risk of shocks spreading across the broader financial system increases.
In its latest risk monitoring report, ESMA highlighted tokenized equities as an area of concern. While still negligible compared to global stock markets, tokenized equities are gaining traction and introducing new participants and infrastructure that could reshape market structure.
ESMA also flagged prediction markets as a growing risk. The regulator warns that the use of crypto in these markets can make it harder to detect insider trading, wash trading, and coordinated market manipulation.