EU regulator says risks of high concentration in crypto market

According to an ESMA report, 90% of crypto trading is accounted for by 10 exchanges

11.04.2024 - 14:55

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2 min

What’s new? In a new report analyzing the crypto market, the European Securities and Markets Authority (ESMA) states the highly concentrated nature of crypto trading and the potential risks it poses to the broader financial ecosystem. The report comes as the EU prepares to implement a comprehensive regulatory framework for the industry called the Markets in Crypto-Assets (MiCA) regulation.

ESMA report

What else is known? ESMA’s findings show that just ten crypto exchanges control approximately 90% of all cryptocurrency transactions, with Binance leading the way with a 49% market share. At the same time, Upbit, which came in second place, only accounts for about 1/7th of the total volume.

While this level of concentration is potentially beneficial in terms of efficiency, it raises serious concerns about the consequences of a failure or malfunction on any major exchange, the researchers note.

The report also says that the euro is very little involved in cryptocurrency trading, as most transactions take place outside the EU on offshore exchanges. An analysis of the distribution of fiat currencies involved in the sector showed a high reliance on the US dollar and Korean won, which are used for both cryptocurrency purchases and reverse conversions.

ESMA notes that the announcement of the upcoming MiCA implementation has not yet led to an increase in the share of transactions in euros.

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In addition, ESMA analysts refuted the popular notion that cryptocurrencies serve as a safe haven in times of market stress, noting their correlation with the stock market and lack of stability against gold.

ESMA’s findings emphasize the importance of supervision and risk management in the rapidly evolving crypto sector ahead of MiCA implementation. The supervisory authority plans to discuss the report’s findings on April 25.

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