EU Watchdog to Call for Mandatory External Audits of Crypto Firms' Cyber Defenses to Enhance Consumer Protection

The European Securities and Markets Authority is said to be gearing up to advocate for mandatory external audits of cyber defenses for crypto businesses.

The European Union’s markets watchdog is reportedly planning to call for mandatory external audits of crypto companies’ cyber defenses in an effort to enhance consumer protection amid rising security breaches in the crypto space.

The European Securities and Markets Authority is said to be preparing to advocate for mandatory external audits of cyber defenses for crypto businesses as part of its broader initiative to strengthen consumer protection in the crypto sector.

According to a Wednesday report from the Financial Times, which does not cite specific sources, the European Securities and Markets Authority is considering stricter cyber protection rules and urging European Union lawmakers to amend upcoming regulations to mandate third-party audits assessing the resilience of crypto firms against cyber attacks.

However, the European Commission “has pushed back against the move,” the report reads, adding that the commission is suggesting that ESMA’s proposals may exceed the intended scope of the legislation.

Cybersecurity has become a pressing issue for the crypto industry, with hackers stealing almost $1.4 billion, nearly doubling last year’s figures, per data from TRM Labs. Another blockchain forensic firm Chainalysis reported that the number of hacking incidents in 2024 has seen a modest increase of 2.8% compared to 2023. However, the average value lost per hack has surged by 79.5%, escalating from $5.9 million per incident in 2023 to $10.6 million in 2024, highlighting a growing concern as cybercriminals increasingly focus on centralized exchanges.

Under the upcoming Markets in Crypto-Assets framework, crypto firms will be required to secure licenses from European Union member states starting Dec. 31 and demonstrate robust controls against money laundering and other financial crimes. Some aspects of this regulatory framework have already begun to reshape the industry, with Coinbase recently announcing plans to remove non-compliant stablecoins from its European exchange by year-end.

Concerns about the regulations persist among industry leaders. Paolo Ardoino, CEO of Tether, the largest stablecoin issuer, cautioned that strict cash reserve requirements could create systemic risks for banks. The trend of delisting is not limited to stablecoins, as Kraken recently also announced plans to suspend trading for privacy-focused Monero (XMR) in the European Economic Area, following similar moves by Binance and OKX.

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