The EU authority ESMA warns of cryptocurrencies

The EU authority ESMA warns of cryptocurrencies. The mixing of regulated and unregulated products leads to a dangerous halo effect that end users cannot normally deal with.

Why the EU authority ESMA warns of cryptocurrencies

The EU authority ESMA warns of cryptocurrencies. Investors are particularly at risk if they purchase digital assets from companies that offer both unregulated and regulated products.

The European Securities and Markets Authority speaks in this case of the “halo effect.” Users often only pay attention to the reputation of the respective provider, but do not pay attention to the seriousness of the individual product. Careless purchases would then quickly lead to unexpected losses, it is said.

“Retail investors often rely solely on an investment firm’s reputation, which makes them prone to overlook the potential risks of the unregulated products and/or services offered by investment firms.” Writes ESMA in a press release .

Risks of this kind can be observed to a greater extent when providers specifically provide unregulated products that are intended to intentionally imitate a regulated equivalent. The authority expects companies to present similarities and differences in a way that is prepared for the end user.

Crypto regulation in the EU on the way

A first comprehensive crypto regulation in the EU is currently on the way. After the EU Council recently passed the MiCA and TFR laws, they will come into force in 2024.

The EU crypto industry and the offer for citizens of EU countries could change the two laws significantly. For example, centralized crypto exchanges are prohibited from selling privacy coins. Stablecoins that track foreign currencies are also the target of severe restrictions. Experts expect that euro stablecoins will experience a popularization for the first time as a result.

While proponents believe that MiCA will make the European Union a sought-after location for the crypto industry, critics speak of drastic restrictions on freedom. MEP Patrick Breyer spoke of the increase in the surveillance state. According to him, the intended reduction in crime is not to be expected.

According to Breyer, the ban on privacy coins and anonymous digital payments is harmful to both ordinary people and dissidents.