The European Central Bank (ECB) is warning that the crypto markets may pose a risk to financial stability if the sector maintains its rapid growth of the past two years and financial firms deepen their involvement.
In its biannual financial stability review, the ECB said on Tuesday that widespread exposure to crypto among financial institutions could put capital at risk and damage investor confidence, lending and the financial markets more broadly.
They also cautioned against investing in cryptocurrency because there's not enough data on the sector to do proper risk assessments.
The ECB, in fact, said crypto is not appropriate for most retail investors and urged European Union authorities to approve new rules for crypto assets.
These rules were first published in 2020 but are not expected to be approved until 2024.
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