The European Securities and Markets Authority (ESMA) has raised fresh concerns about the growing integration of cryptocurrencies into mainstream finance, warning that this trend could increasingly threaten global market stability.
Addressing the Economic and Monetary Affairs Committee, ESMA Executive Director Natasha Cazenave cautioned that sharp declines in crypto prices may eventually trigger broader financial turbulence.
“As the sector continues to expand and deepen its ties with conventional finance, we can’t dismiss the possibility of future market shocks spilling over,”
she warned, signaling a shift in how regulators perceive systemic risks tied to digital assets.
Although Cazenave acknowledged that crypto assets currently represent just around 1% of global financial holdings—too small, for now, to cause major disruption—she emphasized that the situation is rapidly evolving. The growing interconnection between crypto and traditional financial systems, particularly in the more crypto-friendly United States, is a key factor demanding close scrutiny.
“Crypto-asset markets evolve rapidly and often in unpredictable ways,”
Cazenave said, stressing the need for continuous monitoring. She further warned that volatility, even in relatively small markets, has the potential to spark or amplify wider financial instability.
To mitigate these risks, the European Union has already begun implementing regulatory safeguards, most notably through the Markets in Crypto-Assets (MiCA) framework, which came into effect last year. Cazenave hailed MiCA as a “breakthrough” in establishing a regulatory foundation for the crypto industry. However, she was quick to caution that oversight alone is not a panacea. “There is no such thing as a safe crypto-asset,” she stated, underscoring the need for potentially stricter rules in the face of evolving market threats.
In a related development, the European Union’s insurance regulator has proposed stringent new capital requirements for companies exposed to digital assets. According to a Technical Advice report submitted to the European Commission, the European Insurance and Occupational Pensions Authority (EIOPA) recommended that insurers be required to hold capital reserves equivalent to the full value of their cryptocurrency holdings.
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