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Crypto-Assets Impact on Traditional Markets Is Small, but Can Pose Systemic Risk: EU Watchdog

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Europe’s financial overseer does not seem overly concerned about cryptocurrencies’ impact on the financial system, but still said regulators should monitor risks in case.

The European Systemic Risk Board released a report on Thursday titled “Crypto-assets and decentralised finance- systemic implications and policy options.”“Even though the crypto-asset sector might not be systemic today, authorities should be able to understand the developments of the sector and their potential implications for financial stability,” the board said in the report.

The market capitalization of crypto-assets “appears fairly small,” the board said.The reported market capitalization for the assets, including stablecoins and for bitcoin where private keys are thought to be lost, amount to about 0.8% of the EU financial sector, according to the report.

That is about the size of Amazon or the size of the 15th largest bank in the European Union, the board said. Decentralized finance, or DeFi makes up a small portion, so has no “significant connect yet to traditional finance,” according to the report.

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