Regulator in Europe Warns of "Cautionary Lesson" from the Crypto Market Fall
According to Europe's top securities regulator, the cryptocurrency market crash should serve as a "warning" against investing in risky, unregulated assets, and investors cannot rely on a bailout.
Verena Ross, chair of the European Securities and Markets Authority, said, "We already warned earlier this year... about the serious risks retail investors were taking in investing in some of the crypto assets."
The global crypto market has declined by more than 70 per cent in the past year, and Ross expressed concern about the implications for small investors.
“I think there is a real question about whether many of these [crypto assets] will survive... I hope that some of these investors will see this and take a cautionary lesson at least to think about how much of their money they invest in these kinds of assets.”
She noted that there was no possibility of a European bailout for cash-strapped buyers due to the widespread warnings about the risks.
ESMA and Europe's other major financial regulators warned shoppers in March of the "very real risk of losing all their invested money" if they purchased cryptocurrencies, using tougher language than a similar warning issued a year earlier.
“We have all said that this is something that is not currently regulated, not something where there is any control over the providers, [where] we know there is a lot of fraud and aggressive marketing going on,” Ross said.
ESMA is preparing to assume licencing responsibility for Europe's largest crypto asset service providers under a landmark agreement reached in Brussels last month. The agreement also includes provisions such as mandatory environmental disclosures and some client protection for issues such as misplaced crypto wallets.
The agreement goes into effect midway through 2023 and has an 18-month implementation period. Ross stated that it was crucial to move as quickly as possible and to strive for "convergence" of existing national regulations, reiterating ECB comments from the previous week.
As inflation and interest rates rise and the economy rapidly deteriorates, ESMA will monitor commodity and other market fluctuations.
“We see real risks of market reactions to the changing economic environment,” mentioned Ross, including that regulators are attempting to know “where those risks might be arising so that... at least we are conscious of what the significant market corrections are that could happen”.
Source: Financial Times