The European Securities and Markets Authority (ESMA) has warned that crypto will increasingly threaten traditional financial markets’ stability as the industry grows and becomes more entwined with traditional finance players.

“We cannot rule out that future sharp drops in crypto prices could have knock-on effects on our financial system,” ESMA’s executive director Natasha Cazenave said in an April 8 statement to the Economic and Monetary Affairs Committee.

Cazenave noted, however, that crypto currently only accounts for 1% of global financial assets and is not yet significant enough to cause major “spillover effects” into traditional financial markets.

She warned that interconnections between crypto and traditional markets are rapidly growing — particularly in the more crypto-friendly US — and called for closer monitoring.

“Crypto-assets markets evolve quickly, in an often unpredictable manner, and we need to keep a close eye on these developments,” Cazenave said, adding:

“Turmoil, even in small markets, can originate or catalyze broader stability issues in our financial system.”

Cazenave’s concerns ranged from spot crypto exchange-traded funds and stablecoin use to hacks, scams and scandals — highlighting the recent $1.4 billion Bybit exploit and FTX’s collapse in November 2022.

Today in the ECON Committee, the role of crypto assets in relation to financial market stability was discussed. The European Central Bank (ECB) and the European Securities and Markets Authority (ESMA) were present.

I raised a critical question about the digital euro.… pic.twitter.com/KST7FRBhFF

— Engin Eroglu (@EnginEroglu_FW) April 8, 2025

The European Union has already implemented several measures to safeguard against crypto risks, most notably the Markets in Crypto-Assets (MiCA) regulation that was rolled out last year.

While Cazenave said MiCA marked a “breakthrough” for crypto regulation, she added that there is “no such thing as a safe crypto-asset” and that more rules may need to be implemented to mitigate future risks.

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Her comments come as both crypto and the stock markets have experienced double-digit falls over the last few weeks as the Trump administration continues to follow through on its tariff plans.

Europe lags US in crypto adoption

While crypto adoption has accelerated in the US, Cazenave noted that over 95% of European banks remain on the sidelines, with no involvement in crypto-related activities.

However, retail participation is on the rise, with an estimated 10% to 20% of European investors having crypto exposure, which is in line with growing global interest, Cazenave said.

Most reports measuring US crypto adoption suggest that the range of adoption is between 15% and 28% of the population.

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