European regulators point out that the US openness to cryptocurrencies could increase the level of risk in traditional finance (TradFi).
“This approach, which supports cryptocurrencies, could accelerate their adoption, including among institutional investors,” the ESMA representative noted.
Author: Camomile Shumba | Edited by: Sheldon Reback Updated: April 1, 2025, 5:25 PM Published: April 1, 2025, 2:37 PM
What you need to consider:
- An ESMA spokesman argues that the US's favourable stance towards cryptocurrencies could increase risk in financial markets by deepening the links between cryptocurrencies and traditional finance.
- A report from three European regulators identified “volatile valuations of crypto assets driven by expectations of US deregulatory policies” as a key factor in financial markets.
According to the European Securities and Markets Authority, the US stance on cryptocurrencies could lead to increased risk in financial markets by deepening the links between traditional finance (TradFi) and the digital asset economy.
“This pro-cryptocurrency approach could accelerate their adoption, including by institutional investors,” a representative of the European Union’s financial markets regulator said in an interview. “This, in turn, would increase interconnectedness and, in the absence of adequate safeguards, create risks of negative spillovers between cryptocurrencies and traditional markets.”
Upon taking office on January 20, Donald Trump ordered his administration to create a Bitcoin reserve and called for crypto-friendly policies. The cryptocurrency market has already responded positively to Trump’s election victory in November, with Bitcoin (BTC) reaching a record high of around $109,000 on the day of his inauguration, according to CoinDesk.
In a joint report published on Monday, ESMA, the European Banking Authority and the European Insurance and Occupational Pensions Authority cited “volatile valuation of crypto assets driven by expectations of US deregulatory policies and increased interconnections with traditional financial markets” as a key factor in financial markets.
In a separate statement, Piero Cipollone, a member of the European Central Bank's executive board, called for the introduction of a digital euro – a digital version of the single currency backed by the ECB – to replace crypto assets, which he described as “highly volatile and speculative in nature.”
“In addition, the United States’ desire to maintain the dollar’s global dominance by promoting stablecoins around the world creates its own problems,” he added.
