European Securities and Markets Authority (ESMA) Chair Verena Ross says that the crypto market crash should be a “cautionary lesson” for investors. She noted that there is a “real question” about whether many crypto assets will survive.
ESMA Chair Crypto Risks and Regulation
Verena Ross (chair of European Securities and Markets Authority) has warned investors against investing in cryptocurrency after it lost 70%, according to Sunday’s Financial Times.
Her statement stressed the fact that no European bailout is possible for investors in crypto.
We already warned earlier this year . . . About the risks faced by retail investors when they invested in certain crypto assets.
As per the provisions of the Markets in Crypto-Assets proposal, ESMA is responsible for licensing cryptocurrency asset service providers. This agreement will come into effect in the middle of 2023. It has an 18 month implementation period.
Crypto platforms that are not adequately protecting investors or threatening financial stability and market integrity will be banned or restricted by the regulator.
Ross raised concerns that small investors might lose their money. He cited the fact that the crypto market worldwide has contracted by 70% over the last year. Numerous investors lost their money when stablecoins terrausd and cryptocurrency terra collapsed in May. Her opinion was:
It is not clear to me if many of these will ever be used. [crypto assets]They will prevail.
Gary Gensler who is the chairman of U.S. Securities and Exchange Commission, (SEC) stated in May that there would be many failures of crypto tokens after the collapses of LUNA and UST.
The ESMA chair continued: “I hope that some of these investors will see this and will take a cautionary lesson at least to think about how much of their money they invest in these kinds of assets.”
In March, ESMA and other leading European financial regulators warned consumers that “many crypto assets are highly risky and speculative,” noting that investors “face the very real possibility of losing all their invested money if they buy these assets.”
Ross further stated:
We have all said that this is something that is not currently regulated, not something where there is any control over the providers … We know there is a lot of fraud and aggressive marketing going on.
Christine Lagarde was the President of the European Central Bank (ECB) last month. She warned crypto assets and decentralized financing (defi), could present financial stability risk. “This would be particularly the case if the rapid growth of crypto-asset markets and services continue … and the interconnectedness with both the traditional financial sector and the broader economy is intensified,” she stressed.
The Financial Stability Board (FSB), announced Monday that it would deliver a report to G20 finance ministers, central bank governors, and crypto asset regulators outlining a strong regulatory framework for crypto assets in October.
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