European regulator warns of “cautious lesson” from cryptocurrency

Crypto investors should take the market crash as a “warning lesson” about putting money into risky unregulated assets and cannot rely on any form of bailout, Europe’s top securities regulator has said.

“We warned earlier this year … about the serious risk retail investors took by investing in some of the cryptocurrencies,” said Verena Ross, head of the European Securities and Markets Authority.

The global crypto market has fallen by more than 70 percent in the past year, and Ross said she was concerned about the implications for small investors.

“I think there is a real question about many of these [crypto assets] will survive. . . I hope some of these investors will see this and will take a cautious lesson at least to think about how much of their money they are investing in this type of asset. ”

She added that there were no prospects for a European rescue package for private investors because warnings about the dangers had been so widespread.

In March, ESMA and Europe’s other leading financial regulators warned consumers about the “very real possibility of losing all the money invested” if they bought cryptocurrency, using stronger language than a similar warning a year earlier.

“We have all said that this is something that is not regulated at the moment, not something where this is some control over the suppliers, [where] we know there is a lot of fraud and aggressive marketing going on, ”Ross said, adding that regulators used social media to try to send their warnings to the public most involved in crypto.

ESMA is preparing to take on licensing responsibilities for Europe’s largest providers of crypto-activation services under a landmark agreement agreed in Brussels last month, which also includes provisions such as mandatory environmental information and some consumer protection for things like lost crypto wallets.

The agreement enters into force from mid-2023 and has an implementation period of 18 months. Ross said it was important to move as quickly as possible and push for “convergence” of national rules already in place, following calls from the ECB last week.

ESMA also monitors developments in commodities and other markets as inflation and interest rates rise and the sharply deteriorating economic environment drives volatility.

“We see real risks of market reactions to the changing economic environment,” Ross said, adding that regulators are trying to understand “where these risks may arise so that… We are at least aware of what the significant market corrections are that can happen”.