Crypto: ESMA Warns About Risks for Traditional Finance

The links between crypto and traditional finance are becoming significant enough to attract more attention from the European regulator. In its risk monitoring report published on September 10, ESMA calls for close monitoring of this interconnection. Tokenized stocks, DeFi and prediction markets are directly cited. The regulator does not yet speak of an established systemic risk, but rather new channels capable of transmitting a crypto shock to the rest of the financial markets.

In brief

Crypto and traditional finance are becoming less and less separated

The phrase used by ESMA is quite clear. The regulator calls for increased monitoring of the growing link between crypto markets it considers “increasingly vulnerable” and the financial system at large.

Tokenized stocks are one of the examples cited. Their weight is still negligible compared to global equity markets. Nevertheless, their adoption is progressing, bringing new infrastructures, new investors and new intermediaries into the same circuit.