The European Securities and Markets Authority (ESMA) expresses concerns about the impact of cryptocurrencies on the financial system but notes that, at present, direct risks to the financial stability of the European Union are limited, as fewer than 5% of European banks are involved with digital assets.
Natasha Cazenave, Executive Director of ESMA, during a hearing of the European Parliament’s Committee on Economic and Monetary Affairs, emphasized that the sharp rise of the crypto market in 2024 and its subsequent fall are associated with significant risks, despite the implementation of the MiCA regulation. According to the regulator, there are no “safe” crypto-assets.
According to ESMA data, the market cap of crypto-assets doubled in 2024, reaching €3.3 trillion by the end of the year. More than 50% of this volume was attributed to Bitcoin, whose price increased by nearly 140% over the year. However, by Q1 2025, the market dropped by 20% due to worsening macroeconomic conditions and the largest-ever hack of the Bybit crypto exchange, resulting in the theft of $1.4 billion.
Key risks identified by ESMA are related to derivatives markets, the involvement of the banking sector in digital asset operations, and the activities of funds that provide institutional access to the crypto market. However, at present, the direct risks to European financial stability remain limited because more than 95% of banks in the EU don’t work with crypto-assets, and the share of investment funds dealing with cryptocurrencies is less than 1% of the total number of funds.
ESMA continues to observe growing interest from institutional investors. Since January 2024, inflows into spot Bitcoin ETPs in the U.S. amounted to €34 billion. Some pension funds began to form cryptocurrency portfolios. Meanwhile, American regulators are easing requirements for banks engaging in crypto operations, which increases traditional finance’s involvement in digital assets.
The regulator has a special focus on stablecoins, with a total volume of around €210 billion, according to ESMA. Most of the stablecoins are pegged to the U.S. dollar. Against this backdrop, in January 2025, ESMA urged providers to limit operations with stablecoins that don’t comply with MiCA requirements.
