{"id":340047,"date":"2021-09-16T13:48:56","date_gmt":"2021-09-16T10:48:56","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/eu-regulator-sees-crypto-as-sign-of-increased-risk-taking-in-current-climate\/"},"modified":"2021-09-16T13:48:56","modified_gmt":"2021-09-16T10:48:56","slug":"eu-regulator-sees-crypto-as-sign-of-increased-risk-taking-in-current-climate","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/eu-regulator-sees-crypto-as-sign-of-increased-risk-taking-in-current-climate\/","title":{"rendered":"# EU regulator sees crypto as sign of increased risk-taking in current climate"},"content":{"rendered":"

“# EU regulator sees crypto as sign of increased risk-taking in current climate <\/strong>”
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The European Securities and Markets Authority (ESMA) has published its report<\/a> on trends, risks and vulnerabilities in the EU markets during the first half of 2021 (1H21).<\/p>\n

Its takeaways included the argument that crypto markets\u2019 extraordinary volatility and growth make a compelling case for the need for a targeted regulatory regime, as sketched out in the European Commission\u2019s proposed Markets in Crypto-Assets regulations.<\/p>\n

Much has been riding on the EU and global market\u2019s recovery during 1H21 amid the ongoing impact of the COVID-19 pandemic. ESMA\u2019s report notes that the economic outlook has continued to improve overall, with the European economy now forecast to reach its pre-pandemic output by the end of 2022, earlier than had been expected.\u00a0<\/p>\n

This recovery has been fueled by the relaxation of public health restrictions, some reduction in uncertainty, and central banks\u2019 activism in providing supportive monetary policies. When it comes to the medium-term risks of the current climate, ESMA has taken the crypto markets as a bellwether of market sentiment and dynamics during the past six months:<\/p>\n

“Rising valuations across asset classes, massive price swings in cryptoassets and event-driven risks observed in 1H21 amid elevated trading volumes raise questions about increased risk-taking behaviour and possible market exuberance.”<\/p><\/blockquote>\n

This exuberance, in the ESMA\u2019s view, has been visible in the Game<\/a>Stop saga and the broader rise of social media<\/a>-fueled retail trading, coupled with the huge price growth in crypto assets in the first quarter of this year. Much of this increase in trading activity has been happ<\/a>ening outside the EU\u2019s regulatory perimeter, the report underlines, raising investor protection concerns. <\/p>\n

The ESMA attributed rising consumer confidence during this period to a range of factors, including innovative new business models and gamified features in online and mobile trading platforms.\u00a0Parallel to the retail trading boom, ESMA is keeping a close eye on Decentralized Finance (DeFi), noting that the 47 billion euros ($55.3 billion) locked in DeFi in early September was down from its heights in mid-May, yet up 1,200% from end-July 2020. <\/p>\n

The ESMA recognized DeFi\u2019s benefits, including disintermediation, 24\/7 availability and censorship resistance, and noted that the increasing use of stablecoins and central bank digital currencies are likely to make the boundaries between traditional finance and DeFi more porous over time. However, especially due to institutional investors\u2019 proactivity, the ESMA considered that there is a growing possibility that DeFi risks will spill over into the real economy, even though the market remains small for the time being.<\/p>\n

Related:\u00a0EU securities regulator warns about risks of \u2018non-regulated\u2019 cryptocurrencies<\/em><\/strong><\/p>\n

The report also noted that institutional investors are starting to consider Bitcoin\u2019s (BTC) environmental impact in terms of their ESG targets, which is feeding into the growing interest in Ether (ETH). Alongside its environmental credentials, the ESMA attributed ETH\u2019s success to its smart contract functionality, the DeFi boom, and the blockchain\u2019s role in the nonfungible token ecosystem.<\/p>\n

The regulator’s assessment has been echoed by Pantera Capital CEO Dan Morehead, who this summer\u00a0argued that the blockchain’s upgrade will likely help Ether to outflank Bitcoin as the largest cryptocurrency.<\/p>\n