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<h2 id="header-0">In a document published on Tuesday, the European Securities and Markets Authority (ESMA) cautioned investors that cryptocurrency assets are extremely hazardous and could cause financial instability in the future.</h2>According to the ESMA, there needs to be more regulatory oversight and monitoring of the expanding connections between the cryptocurrency and regular markets. The document demonstrates how European Union officials view crypto market risks in light of the introduction of the MiCA regulatory framework.Risks in the Crypto Market are outlined by the European Securities and Markets Authority.On October 4, a document titled &#34;Crypto-assets and their implications for financial stability&#34; was published by the European Securities and Markets Authority (ESMA). The study claims that cryptoassets expose investors and businesses to enormous losses. Regulators around the world are concerned about the growing overlap between the traditional market and the cryptocurrency sector.Although ESMA thinks there are currently just a few connections between cryptocurrencies and traditional markets, in the future there may be concerns of financial instability in traditional markets due to cryptocurrencies. The risk in the traditional market is increased by the fact that many customer-focused companies, like Tesla, accept Bitcoin as payment.The study lists derivatives, funds, and exchange-traded products (ETPs) as indirect exposure to cryptocurrencies, while institutional and retail investors in cryptoassets are cited as having direct exposure. Additionally, it claims that crypto exchanges, decentralised finance (DeFi), and stablecoins are risk transmission routes to conventional financial markets.Additionally, it cites a survey by the European Supervisory Authorities that reveals around 90 investment funds based in Europe are directly exposed to actual crypto-assets. The studies are a part of the official preparation for the MiCA law, which goes into force in 2024.EU Digital Strategy European Law in 2023The European Union is working to launch the Digital Euro as it gets ready for the MiCA regulatory framework for regulating crypto assets. Mairead McGuinness, an EU commissioner, previously acknowledged that legislation would be proposed to allow the ECB to issue a digital euro from the start of 2023. It will aid in addressing the risks associated with financial stability and bank disintermediation.

The European Securities and Markets Authority attributes financial instability to cryptocurrencies.

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