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European Finance Regulator Calls Crypto ‘Volatile,’ But Innovative

Last week The European Securities and Markets Authority published a report that discussed the market trends and risk factors influencing the market. The Chairman of European Securities and Market Authority Steven Maijoor said that the crypto market is volatile but highly innovative.

Moreover, crypto and blockchain technologies topped the European Securities and Markets Authority innovation scoreboard for the year 2021.  The report entitled “Trends, Risks, and Vulnerabilities,” was 110 pages long. However, regarded crypto as technological and financial trading innovation. In addition to that, the report also concluded that digital trading and the rampant emergence of digital technologies such as crypto is a real threat to the concept of sustained financial development because the crypto market is volatile in nature.

Moreover, the report also concluded that crypto mining is also a threat to environmental sustainability, as crypto mining requires bigger energy sources. The majority of grid stations across the globe are not producing green electricity. So, the soaring environmental cost of cryptocurrency raises serious environmental concerns.

The report further expanded its scope and discussed that crypto market volatility, the rise of decentralized finance (DeFi), central bank-owned digital currencies, and USD-backed stablecoins: the emergence of all these currencies have increased the risks for the traditional monetary framework.

The majority of crypto assets are volatile, crypto trading also falls outside the jurisdictions of the European Regulatory framework; this further enhances the regulators’ concerns over consumer protection.

The European Securities and Market Authority (ESMA) is an independent regulatory authority, authorized by the European Union. The primary responsibility of ESMA is to ensure consumer protection and ensure the stability in the financial market.

The ESMA report was published just before the regulatory authority is planning to launch a new regulatory framework across Europe to regulate the financial markets. This new move will ensure effective and strict measures to mitigate money laundering across Europe. The ESMA Chairman, Steven Maijoor also said that this is a heads-up call for the crypto traders to avoid all sorts of unethical activities and abide by the law. Moreover, the ESMA report also pointed that the new regulatory rules will require tax reporting from all the crypto service providers and crypto traders in Europe.

Moreover, the European Digital Bank decided to launch two years investigation into the Digital Euro initiative from the month of October. Moreover, the report also criticized people behavior when it comes to their willingness of taking the risk. Especially after the Covid-19 pandemic, people have willingly taken a risk to earn maximum profits. The report also argued that one of the biggest reasons that financial markets have become volatile is that people are taking risks willingly. The increased risk behavior creates market volatility.