ESMA warns crypto links could raise risks to traditional finance
Crypto market risks could spread faster as ties to traditional finance deepen. See how tokenized stocks, DeFi exploits, and prediction markets raise concerns.
Europe’s securities regulator said deeper ties between crypto markets and traditional finance could make shocks more likely to spread across the wider financial system.
In a risk monitoring report published on Thursday, the European Securities and Markets Authority said it is watching the growing connection between cryptoasset markets and the broader financial system more closely.
ESMA highlighted tokenized equities, decentralized finance exploits, and prediction markets as areas that could increase spillover risk. The regulator said tokenized stocks are still small compared with global equity markets, but their growing use could bring in new participants and infrastructure. It also warned that crypto activity in prediction markets may make insider trading, wash trading, and coordinated manipulation harder to detect.