U.S. Crypto Policies Might Heighten Risks in Traditional Finance, Say European Regulators
U.S. regulators' pro-crypto stance could potentially escalate risks in traditional financial markets, as identified by European authorities.
U.S. Crypto Policies Might Heighten Risks in Traditional Finance, Say European Regulators
“This crypto-friendly stance has the potential to accelerate crypto adoption, including by institutional investors,” an ESMA spokesperson stated.
Key Points:
- The U.S.’ pro-crypto stance could amplify risk levels in financial markets by intertwining crypto with traditional finance, as indicated by a spokesperson from the European Securities and Markets Authority (ESMA).
- A recent report by three European regulators identified “volatile crypto-asset valuations driven by expectations of U.S. deregulation” as a significant factor in financial markets.
The position taken by U.S. regulators, favorable towards cryptocurrencies, may raise risks in financial markets due to closer ties to traditional finance, according to ESMA’s findings. The spokesperson elaborated, “This could lead to increased interconnectedness and potential spillover effects on traditional markets if safeguards are not in place.”
Since assuming the presidency on January 20, Donald Trump has directed efforts for a Bitcoin reserve and has been supportive of crypto-friendly policies. Following Trump’s electoral victory in November, the crypto market reacted positively, with Bitcoin (BTC) reaching approximately $109,000 on his inauguration day, as reported by CoinDesk.
In a joint report released on Monday, ESMA, along with the European Banking Authority and the European Insurance and Occupational Pensions Authority, pinpointed “volatile crypto-asset valuations influenced by U.S. deregulation expectations and increasing ties to traditional financial markets” as critical concerns for financial markets.
Piero Cipollone, an executive board member of the European Central Bank, advocated for a digital euro, which he termed as a more stable option compared to the highly volatile and speculative nature of crypto assets. “Additionally, the U.S.’s initiative to sustain the dollar’s global supremacy through worldwide stablecoin promotion brings its own challenges,” he remarked.
