According to Ledger Insights, as cited by ChainCatcher, the European Securities and Markets Authority (ESMA) devoted three sections of its latest Trends, Risks and Vulnerabilities Report for the first half of 2026 to digital assets and prediction markets.
Crypto links to traditional finance drew a warning
In the section on crypto assets, ESMA said the growing connection between cryptocurrencies and the traditional financial sector creates risk.
On tokenization, the report said different tokenized versions of the same stock could lead to fragmented liquidity.
Prediction markets have yet to gain traction in Europe
ESMA also said prediction markets have not seen significant development in Europe. The report attributed that in part to the fact that major platforms do not yet hold EU licenses, even though they generally need authorization in most cases.
Potential benefits were listed, but current structures were questioned
ESMA outlined several possible benefits of tokenization, including improved efficiency, broader investor access, programmability, and atomic settlement.
It also questioned how much of those benefits are actually realized in existing wrapper structures. Because ownership of the underlying shares remains off-chain, there is no single source of data on-chain, and self-custody can only be achieved indirectly through these structures, the report said.
ESMA added that tokenized structures introduce extra layers of intermediation, bringing more complexity and risk. Settlement gains are also difficult to deliver in practice. Even when token transfers happen on-chain, the cash leg of a trade is usually settled separately, whether through bank payments or other channels.
That means the promised atomic settlement, where securities and cash are delivered at the same time, has not yet been achieved for some transactions.