ESMA Warns on Cryptocurrency-Traditional Finance Link

The European Securities and Markets Authority (ESMA) has issued a warning about the growing links between cryptocurrency markets and traditional finance. In its latest risk monitoring report, ESMA stated that these connections could amplify the risks of shocks spreading across the broader financial system.

Specifically, the regulator highlighted tokenized equities as an area of concern. While they currently represent a small fraction of global stock markets, ESMA noted that their adoption is increasing, potentially introducing new participants and infrastructure that could reshape market structure.

The report also mentioned decentralized finance (DeFi) exploits as another risk factor. ESMA warned that these events can deepen links between crypto and traditional markets, increasing the potential for financial spillovers.