Europe's markets watchdog warns cyber threats are growing as AI speeds up risks

• ESMA is contacting supervised financial entities to assess cybersecurity defenses in light of AI developments, particularly after Anthropic's Mythos model demonstrated ability to find and exploit previously unknown vulnerabilities
• Ross highlighted the risk that cyber vulnerabilities could coincide with asset valuation corrections, noting current 'very, very high' market valuations driven by tech stocks near all-time highs
• EU regulators have named 19 technology companies as critical third-party providers to finance under new tech resilience regulations, with potential for AI providers to be added later

European Markets Watchdog Warns of Growing AI-Driven Cyber Threats

Key Officials and Organizations:

Verena Ross, chair of the European Securities and Markets Authority (ESMA), warned that artificial intelligence is accelerating cybersecurity risks facing Europe's financial sector. Ross, who steps down October 31, emphasized heightened geopolitical tensions are compounding these threats.

Main Concerns:

The financial industry was recently shaken by Anthropic's AI model "Mythos," which demonstrated the ability to identify and exploit previously unknown cybersecurity vulnerabilities in IT systems. Ross stated ESMA is monitoring how AI models could increase attack speed and has contacted supervised financial entities to assess their cyber defenses.

Regulatory Response:

ESMA and two other EU regulators have designated 19 technology companies as critical third-party providers to the bloc's finance industry under new tech resilience regulations. Ross indicated regulators must "up our game" to oversee what financial entities are doing with AI and build expertise to monitor critical providers.

Market Vulnerabilities:

Ross highlighted concerns about cyber risks coinciding with potential asset valuation corrections. Stock markets in the U.S. and elsewhere are near all-time highs, driven by large tech companies, while volatile oil prices following recent conflicts have unsettled investors. The regulator is monitoring for possible insider trading during volatile periods, with the CFTC reportedly investigating oil derivatives trading.

Crypto Regulation:

EU national regulators have given crypto companies until end of June to secure licenses or cease operations. France's regulator reported nearly one-third of unlicensed crypto firms haven't indicated plans to obtain licenses. The European Commission has proposed expanding ESMA's supervisory powers over major cross-border players, including crypto companies, though the plan faces opposition from some member states.