The European Securities and Markets Authority has issued a warning that as the cryptocurrency sector expands and becomes more intertwined with traditional financial entities, it may pose an increasing risk to the stability of established financial markets.
“We cannot dismiss the possibility that future sharp declines in crypto valuations could trigger repercussions throughout our financial system,” stated the authority’s executive director in an address to the Economic and Monetary Affairs Committee on April 8.
She pointed out that crypto currently represents only about 1% of global financial assets and is not yet substantial enough to create significant “spillover effects” into traditional markets.
However, she cautioned that the connections between cryptocurrency and conventional financial systems are growing rapidly — particularly in the more crypto-accepting US — and emphasized the need for closer observation.
“The markets for crypto assets evolve swiftly, often in unpredictable ways, and we must carefully monitor these changes,” she added:
“Even small market disruptions can spark broader stability concerns within our financial system.”
Her worries encompassed various topics, including spot crypto exchange-traded funds, stablecoin utilization, hacks, scams, and other controversies — spotlighting the recent $1.4 billion exploit of Bybit and the downfall of FTX in November 2022.
During today’s ECON Committee meeting, we discussed the impact of crypto assets on financial market stability. Representatives from the European Central Bank and the European Securities and Markets Authority were present.
I raised a vital question regarding the digital euro.… pic.twitter.com/KST7FRBhFF
— Engin Eroglu (@EnginEroglu_FW) April 8, 2025
The European Union has taken various steps to protect against the risks associated with cryptocurrencies, most notably through the Markets in Crypto-Assets regulation introduced last year.
Although she described the MiCA regulation as a significant advancement in crypto oversight, she emphasized that there is “no such thing as a risk-free crypto asset,” and additional regulations might be necessary to address potential future dangers.
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These remarks come amidst reports of both cryptocurrency and stock markets suffering double-digit declines recently as the Trump administration continues to implement its tariff policies.
Europe trails behind the US in crypto adoption
Despite a surge in cryptocurrency adoption in the US, she noted that over 95% of banks in Europe remain uninvolved in crypto-related activities.
Nonetheless, retail participation is increasing, with approximately 10% to 20% of European investors now holding some form of crypto exposure, reflecting a rise in global interest, according to her observations.
Most analyses of US cryptocurrency adoption suggest that between 15% and 28% of the population is engaged in it.
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