According to the European Securities and Markets Authority (ESMA), the DeFi market does not pose a threat to the financial stability of the European Union.
This conclusion was reached in a recent report published by the regulator, which states that the use of digital currencies in DeFi protocols is still in its early stages and the amount of investment remains small.
As such, the industry does not currently pose a threat to the traditional banking sector.
Furthermore, the size of the cryptocurrency market, including DeFi, is relatively small compared to the total assets held by EU financial institutions, which is estimated at $90 trillion.
While there have been concerns about the potential use of DeFi for money laundering by criminal organizations, Europol has also found that such groups are also utilizing non-fungible tokens (NFTs) for illegal activities.
Overall, ESMA concludes that the current size and limited channels of interaction between traditional and digital markets do not present significant financial stability risks.
