European regulator warns of warning lesson” from crypto crash

Crypto investors should take the market crash as a "lesson of caution" against putting money into risky, unregulated assets and cannot expect any kind of bailout, Europe's top securities regulator said.

"We have already warned this year ... about the serious risks that retail investors were taking when investing in some of the crypto assets," said Verena Ross, chair of the European Securities and Markets Authority.

The global crypto market has fallen more than 70 percent over the past year, and Ross said she is concerned about the impact on retail investors.

"I think there's a real question as to whether many of these [crypto assets] will survive. . . I hope that some of these investors see this and at least take a precautionary measure to think about how much of their money they put into these types of assets."

She added that there was no prospect of a European bailout of out-of-pocket investors because warnings about the dangers were so widespread.

In March, ESMA and Europe's other top financial regulators warned consumers of the "very real possibility of losing all of their invested money" if they buy cryptocurrency, using stronger language than a similar warning a year earlier.

"We've all said this is something that is currently unregulated, not something where this is a control over the providers. [where] we know there's a lot of fraud and aggressive marketing going on," Ross said, adding that regulators were using social media to try to spread their warnings to the audience most engaged with crypto.

ESMA is preparing to take over licensing responsibility for Europe's largest crypto asset service providers under a groundbreaking deal agreed in Brussels last month that also includes provisions such as mandatory environmental disclosures and some consumer protection for things like lost crypto wallets.

The deal will come into force from mid-2023 and has an implementation period of 18 months. Ross said it was important to act as quickly as possible and push for "convergence" of existing national rules, echoing the ECB's calls last week.

ESMA is also monitoring developments in commodity and other markets as inflation and interest rates rise and the sharply deteriorating economic environment drives volatility.

"We see real risks of market reactions to the changing economic environment," Ross said, adding that regulators are trying to understand "where those risks might arise so that . . . at least we are aware of the significant market corrections that could happen."