When European Union officials examined the greatest threats to its financial system, there were the usual suspects, including Brexit, and even climate change.
Due to their growing presence in financial communities, cryptocurrencies also made their way onto the list.
The Joint Committee of the European Supervisory Authorities (ESA) has published its spring 2018 report on risks and vulnerabilities in the EU’s financial system. The committee is made up of the European Insurance and Occupational Pensions Authority, the European Banking Authority, and the European Securities and Markets Authority.
Let’s review these crypto-related highlights.
Cyber risks
At the core of European officials’ concerns about cryptocurrencies are the same concerns over cyber risks – threats to financial markets.
In the report, it is noted that cyber risks have become a significant and highly escalating threat to investor protection, the financial markets and their stability worldwide.
The report states:
[Cyber risks] threaten data integrity and business continuity and are particularly dangerous because of their risk multiplier effect as well as other business risks. Similarly, risks related to virtual currencies have recently materialized, inter alia driven by extraordinary high levels of volatility and associated price falls.
Stern warnings
Apart from cyber risks, EU officials worry about virtual currencies raising “significant” consumer protection issues.
In February, the three ESAs issued a joint consumer warning on virtual currencies. The warning focused on the risks of buying and trading cryptos, as well as financial products that can expose consumers directly to them.
The warning noted that such transactions were “high risk, and consumers could lose most or all of the capital invested.”
Among the risks that were noted:
- extreme volatility and bubble risk
- the lack of a robust secondary market
- operational disruptions
- lack of price transparency
Furthermore, the warning highlighted that virtual currency platforms are not regulated under EU law, so consumers “do not enjoy any of the specific safeguards and legal protections.”
Legislation
We told you in March about FinTech legislation that was being crafted in the EU that addresses how Blockchain would be governed.
This is largely due to Brexit. We reported that with the UK on its way out of the bloc, the EC aims to prepare for the significant gap this exit will leave in the FinTech sector.
Given the strong connection between the industry and the emerging Blockchain technology, Brussels needs to guarantee that growing demand for skilled workers will be met through qualified specialists in an organized market.
This article appeared first on Cryptovest
