EU Regulator Warns Soaring Inflation Could Drive Investors to Crypto — Calls for Unified Regulatory Framework

Europe’s top securities regulator has warned that soaring inflation could drive investors to cryptocurrencies. Stressing that there is “an imbalance” in how each EU country deals with crypto, the regulator calls for a common regulatory framework across European countries.

The European Securities and Markets Authority (ESMA), the EU’s top securities markets regulator, has warned that soaring inflation may drive retail investors into cryptocurrencies, Bloomberg reported Thursday.

The regulator has also called for a formal legal framework to govern the crypto industry across all EU countries.

ESMA Chair Verena Ross said in an interview last week:

With inflation rising, investors will look to find investments which are able to try to compensate for inflation and bring greater returns, which might lead to greater risk taking.

“That is something we are monitoring very closely,” she emphasized.

Many investors believe that bitcoin is a great hedge against inflation, including famed hedge fund manager Paul Tudor Jones. However, the crypto asset is highly volatile; it has fallen 26% over the past 30 days. This month, the crypto market as a whole has shed around $500 billion.

Currently, each EU country sets its own rules on crypto, making decisions based on local laws. There is no common framework for the crypto sector.

The ESMA chair detailed:

There is no EU regulatory framework for these kinds of entities at the moment and so there is currently an imbalance in how national supervisors deal with these entities and how they judge them.

“That’s where a common regulatory framework will help,” she stressed.

Last month, the European Parliament granted ESMA power to regulate crypto issuer and service providers.

The European Parliament and the European Council are currently considering the Markets in Crypto Assets (MiCA) bill. The legislation, introduced in 2020, provides a legal framework for crypto asset markets to develop within the EU.

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