EU securities regulator warns about risks of ‘non-regulated’ cryptos

The European Securities and Markets Authority, the European Union’s independent financial regulator, has warned about the high risk of investing in cryptocurrencies.

In its latest report on trends, risks and vulnerabilities, published on Wednesday, ESMA analyses the impact of COVID-19 on financial markets and highlights the increased risks of investing in unregulated crypto assets.

Authorities noted that crypto assets experienced a huge surge in value and trading volume in the second half of 2020, with bitcoin reaching an all-time high. According to ESMA, the increase is due to positive news in the crypto sector, including PayPal’s decision to launch its buy and sell option for cryptos on its platform, as well as growing interest in decentralized finance, or DeFi. Strong investor demand and the search for yield against the backdrop of unprecedented global fiscal and monetary stimulus are also contributing factors, the agency writes.

With volumes and demand rising, crypto assets are highly volatile and pose major risks to investors, ESMA warns. According to her, the prices of unregulated crypto assets, although rising steadily, pose significant risks to investors.

In the new report, ESMA also highlights the growth of theFi industry and highlights perceived benefits, such as indirect mediation, 24/7 accessibility and resistance to censorship, but also risks, including operational resilience, scalability and governance. ESMA will continue to monitor developments in the BeCeFi, as this may lead to specific regulatory and supervisory challenges, she said.

In February 2021, the chairman of France’s main financial regulator, the Autorité des marchés financiers, proposed that ESMA become the main regulator and supervisor of cryptocurrencies in the EU.

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