EU Watchdog Is Concerned About the Risk Crypto Assets May Pose to the Financial System
- The possible threat that crypto assets could pose to the international financial system is being investigated by the European Systemic Risk Board.
- EU officials have reiterated their “support for a swift adoption and implementation” of MiCA.
- Because of the recent boom and crash in cryptocurrency, regulators are now paying closer attention to the industry.
The ESRB called for a “coordinated and comprehensive approach” to tackling the potential risks posed by crypto assets, noting that any regulatory measures should be designed to minimize negative impacts on innovation.
The body also said that it would continue to monitor the developments in the field of crypto-assets and urged all relevant authorities to exchange information and cooperate closely on this matter.
As crypto prices have fluctuated wildly in recent months, regulators have been paying closer attention to the market. While the digital assets market had a market capitalization of around $790 billion at the start of 2021, it peaked at almost $3 trillion in November before plunging to $1 trillion as of June 30, according to CoinGecko.
The recent collapse of terraUSD (UST) and troubles faced by crypto lenders such as Celsius have heightened concerns about the risks posed by cryptocurrencies. Cryptoassets are notoriously volatile, which can pose challenges for investors seeking to use them for long-term purposes such as payments or savings.
In addition, their decentralized nature means that there is no central authority overseeing their development or usage, making them more vulnerable to fraud and abuse. As such, it is important for potential investors to exercise caution when considering investing in cryptocurrencies.
The ESRB is not alone in its concerns about the potential implications of digital assets on the financial system. In the US, the Securities and Exchange Commission (SEC) has also been active in investigating and taking action against businesses and individuals involved in ICOs and other cryptocurrency-related investment schemes.
The SEC’s actions have mostly been directed at protecting investors from fraud, but there are also concerns that digital assets could be used to facilitate money laundering or other illegal activities. Similarly, in Japan, regulators have been cracking down on crypto exchanges after a number of high-profile hackings led to the loss of millions of dollars worth of digital currency.
The Japanese government has also put pressure on businesses involved in ICOs, leading many companies to abandon their plans to launch token sales in the country. Critics argue that these actions by governments and financial authorities will only serve to stifle innovation and prevent legitimate businesses from operating freely in the space.
They argue that regulation should focus on ensuring that investors are protected from fraud and criminal activity, rather than trying to control or prohibit the use of digital assets altogether.