High risks are persisting in European securities markets, the EU's regulator has warned today, as it again raised concerns about virtual currencies and initial coin offerings (ICOs).
The European Securities and Markets Authority (Esma) said that market risk in securities such as equities "remains at very high level", due to concerns about high valuations and geopolitical uncertainties such as the ongoing Brexit negotiations.
In better news, credit risk – or the risk that a borrower might default on a debt – "has eased in relation to an improving macroeconomic environment but remains high due to possible and sudden repricing in risk premia", Esma stated in its latest Trends, Risks, and Vulnerabilities Report.
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The regulator added that February's foray into market correction territory, which saw the return of equity market volatility, confirmed its "prevailing concerns".
Operational risk, meanwhile, was elevated with a "deteriorating outlook" according to Esma. The regulator held "extensive" concerns around cyber security.
Read more: Jeremy Grantham, who predicted the last two bubbles, warns the stock market is ready for a "melt-up"
ICOs and virtual currencies, such as bitcoin, ethereum and litecoin, again came under fire, as Esma voiced concerns about the risks which such "speculative" investments could pose for retail investors.
The authority said towards the end of last year that the price of "tokens" offered in initial coin offerings could be extremely volatile, "investors may not be able to redeem them for a prolonged period", and that they were "vulnerable to the risk of fraud or money laundering".
Read more: Crypto investors unfazed by recent volatility as they plan to buy more digital currencies
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