EU regulatory body cautions against potential dominance of cryptocurrency market by a limited number of exchanges

The European Securities and Markets Authority (ESMA) has drawn attention to the concentrated nature of crypto trading and the potential risks it poses to the wider financial ecosystem.
ESMA’s research reveals that just 10 exchanges handle around 90% of cryptocurrency transactions, with Binance, the largest among them, controlling half of the market.
The report, which was published on April 10, comes as the European Union (EU) prepares to implement MiCA, the world’s first comprehensive regulatory framework for crypto assets.
While this concentration may improve efficiency, it also raises concerns about the impact of a significant exchange failure or malfunction.
ESMA stated that the concentration is worrisome because the failure of a single asset or exchange could have widespread effects on the crypto ecosystem. In its report, the authority said:
“However, over time, this concentration has increased. In 2019, it was at 54%, and according to ESMA’s latest data, it has now risen to 73%.”
The report also highlights the limited presence of the euro in cryptocurrency trading, despite the introduction of the MiCA regulation. However, once implemented in 2024, it could serve as a potential catalyst for growth as it aims to enhance investor protection. ESMA explained:
“Additionally, ESMA rejects the notion that cryptocurrencies act as safe havens during times of market stress, citing their correlation with equities and lack of stability compared to gold.”
MiCA, which was first proposed in September 2020 and approved by the European Parliament in April 2023, seeks to establish a new era of regulation for crypto assets, emphasizing the industry’s increasing importance in the financial sector.
MiCA applies to all types of crypto assets, including securities and e-money, that are not currently covered by traditional EU financial regulations.
As the EU introduces its comprehensive regulatory framework for crypto assets, ESMA’s findings highlight the significance of oversight and risk management in this rapidly evolving sector.
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