World Crypto Global
- Written by: Damian Chmiel
- Thu, 11 Apr 2024
- Israel
In acomprehensive analysis of the cryptocurrency market, the European Securitiesand Markets Authority (ESMA) has revealed the highly concentrated natureof crypto trading and the potential risks it poses to the broader financialecosystem. The report,released on Wednesday, comes as the European Union prepares to implement theworld's first extensive regulatory framework for cryptoassets, dubbed MiCA.EU Watchdog RaisesConcern over Crypto Market ConcentrationESMA's findings reveal that a mere ten exchanges oversee approximately 90% of allcryptocurrency trades, with Binance leading the pack with anastonishing 50% share in the market. The recent Finance Magnates Intelligence study confirms the market watchdog data, indicatingan increase in trading volumes of the top 10 crypto exchanges.While this level of concentration is potentially beneficial from an efficiency standpoint, it raises significant concerns about the implications of a failure or malfunctionat a major exchange.The top 10exchanges execute around 90% of total trading volume and, with a volume of overUSD 3.7 trillion or a market share of 49%, Binance is the largest exchange,ESMA commented in its report. The runner-up, Upbit, recorded only about a seventhof this volume."A recent report by #ESMA analyses the dynamics of crypto asset trading and how they compare to #TradFi markets.Here's a TL;DR pic.twitter.com/ZFAWHwO9iL European Crypto Initiative (@EuCInitiative) April 10, 2024Thisconcentration has increased over the years. In 2019, it was 54%, and currently,according to ESMA, it has risen to 73%.Euro Is Not Important inCrypto TransactionsThe reportrevealed that the euro has minimal involvement in cryptocurrency trading,with most transactions occurring outside the EU at exchanges domiciled in taxhavens.Thedistribution of involved fiat money reflects a high reliance on the US dollarand the South Korean won as the markets on- and off-ramp, ESMA explained. Theeuro only plays a minor role and the announcement of the MiCA regulation hasnot caused an increase in euro transactions so far. USD and South Korean Won are predominant, while the Euro plays a minor role. #MiCA has not affected Euro transactions significantly. European Crypto Initiative (@EuCInitiative) April 10, 2024Furthermore,ESMA debunks the notion that cryptocurrencies serve as a safe haven duringtimes of market stress, noting a co-movement with equities and lack of stability in relation with gold.As the EUrolls out its comprehensive regulatory framework for cryptoassets calledMiCA, ESMA's findings underscore the importance of oversight and riskmanagement in this rapidly evolving sector. The watchdog plans to discuss itsreport in greater detail during a webinar on April 25.Regarding MiCA, ESMA publishedits final report a few weeks ago and seeks to strike a balance between a high level ofinvestor protection and innovation within the crypto industry.This article was written by Damian Chmiel at www.financemagnates.com.
