U.S. Crypto-Friendly Policies May Increase Risks in Traditional Finance
The European Securities and Markets Authority (ESMA) warns that the U.S. crypto-friendly policies could elevate risks in financial markets by strengthening ties between traditional finance and the digital asset sector. Key points include:
- Potential for increased crypto adoption, especially among institutional investors.
- Heightened interconnectedness may lead to negative spillover effects without proper safeguards.
- A joint report from ESMA, the European Banking Authority, and the European Insurance and Occupational Pensions Authority highlights volatile crypto valuations influenced by U.S. deregulatory policies.
- Piero Cipollone from the European Central Bank advocates for a digital euro as a stable alternative to highly volatile crypto assets.
- Cipollone notes that U.S. efforts to sustain the dollar's dominance via stablecoins pose additional challenges.