Crypto Market News: Crypto Crash Could Rock Global Markets, Warns EU Regulator

The European Securities and Markets Authority (ESMA) has warned about the rapid growth of the cryptocurrency sector as it may cause possible risks to the financial stability. Further integration of digital assets with conventional finance would bring greater chances of market disturbances, ESMA’s government director Natasha Cazenave stated.

Speaking to the Economic and Monetary Affairs Committee of the European Parliament, Cazenave noted that while digital assets still make up a small portion of the global financial system, their growing influence cannot be ignored. 

“We are seeing early signs of integration between crypto and traditional financial systems,” she stated. “Under strained conditions, even relatively small markets could act as triggers for broader disruptions.”

Current EU Exposure to Crypto is Limited

Despite the concerns raised, ESMA confirmed that the level of direct crypto exposure within the EU remains low. Based on current data, over 95% of banks in the European Union are not engaged in any crypto-related activity. 

Additionally, investment funds with exposure to crypto assets represent less than 1% of the total market within the EU.

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

However, there is growing interest from individual investors across Europe. According to Cazenave, retail participation is steadily increasing. 

“Between one in ten and one in five individuals in Europe are estimated to have some level of crypto holdings,” she said. 

Meanwhile, this level of involvement, while not yet dominant, reflects a shift in market dynamics that may evolve further over time.

Potential Threats from Stablecoins and Industry Failures

ESMA also expressed concern over the growing use of stablecoins, which are designed to maintain a fixed value against traditional currencies. Cazenave warned that if there is a sudden loss of trust in one of these products, the financial instruments backing the stablecoin could come under pressure. 

“If users begin to withdraw rapidly from a stablecoin, the assets used to support its value could be sold off, creating wider market stress,” she explained.

In her address, Cazenave referenced past industry events, including the failure of major platforms and cyber incidents. “Recent cases such as the collapse of major exchanges and large-scale security breaches demonstrate how quickly confidence can be lost in this market,” she said. These events highlight the potential for isolated failures to have wider effects beyond the crypto space.

Ongoing Regulatory Measures and Calls for Monitoring

The ESMA warning comes as authorities across the globe, especially in the U.S., are lowering barriers between crypto and banking operations. Yet, the EU has introduced oversight on crypto-assets with the implementation of frameworks such as the Markets in Crypto-Assets (MiCA) law.

But more work might be necessary, although Cazenave concedes that a regulatory force is ‘now in place.’ “MiCA gives us tools to address some of the challenges, but it does not eliminate the risks,” she said. “There remains no such thing as a completely safe digital asset.” The ESMA will keep the market developments close under observation and adjust its approach accordingly.