European Securities and Markets Authority (ESMA) Chair, Verena Ross, has warned that many crypto assets won’t survive the market crash.
Consequently, the regulator’s boss advised that the crypto market crash should be a “cautionary lesson” for investors.
She said that there is a “real question” about whether many crypto assets will survive.
Verena Ross, chair of the European Securities and Markets Authority (ESMA), has cautioned investors about cryptocurrency investing after the crypto market lost 70% of its value, the Financial Times reported Sunday.
Emphasizing that there was no prospect of a European bailout for out-of-pocket crypto investors, she said:
“We already warned earlier this year . . . about the serious risks retail investors were taking investing in some of the crypto assets.”
ESMA will be responsible for licensing crypto asset service providers as recently agreed in Brussels as part of the provisional agreement on the Markets in Crypto-Assets (MiCA) proposal. The deal will enter into force from mid-2023 and has an 18-month implementation period.
The regulator will have the power to ban or restrict crypto platforms if they are seen to not properly protect investors, or threaten market integrity or financial stability.
Ross expressed concerns about small investors losing money, citing that the global crypto market has shrunk by more than 70% in the past year.
In May, cryptocurrency terra (LUNA) and stablecoin terrausd (UST) collapsed, wiping out many investors. She opined:
“I think there is a real question about whether many of these [crypto assets] will survive.”
The chairman of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, warned in May after the collapse of LUNA and UST that many crypto tokens will fail.
“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.”
Last month, the president of the European Central Bank (ECB), Christine Lagarde, warned that crypto assets and decentralized finance (defi) could pose financial stability risks.
“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.
On Monday, the Financial Stability Board (FSB) announced that it will deliver a report outlining a robust regulatory framework for crypto assets to the G20 finance ministers and central bank governors in October.