European regulators of the use of crypto assets

Although crypto assets have become a hot topic in fund management circles, three European regulators: European Banking Authority (EBA), European Securities and Markets Authority (ESMA) and European Insurance and Occupational Pensions Authority (EIOPA) have issued a warning of the dangers of using them such as price volatility, misleading information, fraud and manipulation.

In a joint statement, they said crypto investors and traders must “face the very real possibility of losing all their invested money if they but these assets.”

They also noted that investors are privy to misleading advertisements, including those on social media and from influencers.

It said that crypto investors “should be particularly wary of promised fast or high returns, especially those that look too good to be true.”

This is not the first warning against crypto currencies issued by any European regulator but is the first collectve warning.  ESMA had previously cautioned against the volatility of the crypto currency market.

All eyes will be on the newly passed Markets In Crypto Assets (MiCA) regulatory package for governing digital assets to see if it will help mitigate some of these risks.

It passed through a parliamentary committee earlier this week and is now moving on to the next stage of negotiations between EU governments before being eventually ratified.

The framework includes draft rules on “supervision, consumer protection and environmental sustainability” of crypto assets, including bitcoin.

Key provisions would cover the issuance of digital tokens, including stablecoins, or “asset-referenced” tokens pegged in value to a hard currency or other asset.

The EU also aims to establish rules for transparency, disclosure, and supervision of crypto transactions, a legal framework to help ensure financial stability, and measures to prevent illicit activity, including money laundering and terrorist financing with crypto.

“By adopting the MiCA report, the European Parliament has paved the way for an innovation-friendly crypto regulation that can set standards worldwide,” said Stefan Berger, a German member of parliament, in a statement.

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