Europe’s top securities regulator issued a broader warning Thursday about the increasing connection between cryptocurrency markets and conventional finance.
European Securities and Markets Authority Chair Verena Ross said high financial-asset valuations, deteriorating macro conditions and geopolitical uncertainty could create conditions for an abrupt market correction.
Crypto is now part of that risk assessment because the sector is increasingly intertwined with traditional markets through funds, tokenized assets and institutional trading infrastructure.
ESMA acknowledged that tokenized equities still account for only a small portion of securities activity, but warned that growth could eventually affect market structure.
The agency also highlighted cyber and AI-related operational risks as financial systems become increasingly automated and interconnected.
Prediction markets received separate scrutiny. European regulators are concerned that platforms offering event contracts can create difficult questions around insider information, manipulation and the distinction between gambling and regulated financial products.
Those warnings arrive the same day Nasdaq announced its $100 million investment in Kraken parent Payward, underscoring how quickly the connection between crypto infrastructure and conventional capital markets is developing.
TOKEN RECON ASSESSMENT
Crypto’s regulatory problem is changing.
Authorities are no longer examining only whether individual tokens qualify as securities.
They increasingly have to ask whether crypto market structure itself can create systemic, operational or market-integrity risks once it becomes connected to traditional finance.
Watch European treatment of tokenized securities, prediction markets, stablecoins and cross-market surveillance.
Sources: Reuters. Financial Times
