ESMA flags risks from closer crypto-finance links

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Closer ties between crypto markets and traditional finance could increase the potential for disruptions to spread across the financial system, the European Securities and Markets Authority (ESMA) has warned.

In its latest risk monitoring report, the regulator pointed to tokenised equities and recent decentralised finance (DeFi) exploits as signs of increasing interconnectedness between the two sectors.

ESMA said tokenised equities still represent a small share of global stock markets but could bring new investors, market infrastructure and financial firms into crypto markets as adoption grows.