Regulated crypto firms face ‘halo effect’ risk: ESMA
In these situations, “there is a significant risk that clients and prospective clients misunderstand the protections they are afforded,” the regulator said in its statement. It noted that unregulated products don’t have the same safeguards when it comes to issues such as managing conflicts of interests, complaint handling requirements, safeguarding clients’ assets and ongoing supervision.
Given its concerns, the regulator also provided new guidance to crypto firms, calling on them to take measures to avoid client confusion and the added investor protection risks that can arise from this halo effect.
“To avoid any misunderstanding [crypto platforms] should clearly communicate the regulatory status of each…
