EU Watchdog Warns 90% of Crypto Trading Funneled Through Few Exchanges
The European Union’s (EU) securities regulator warned about the high concentration of trading activity on a limited number of crypto exchanges. Notably, Binance, a single platform, controls roughly half of the entire market, it said Wednesday.
Analysis from the European Securities and Markets Authority revealed that a mere 10 exchanges handle about 90% of all cryptocurrency trades. Further, the report identified significant variations in market liquidity, with a tendency for larger exchanges to exhibit higher levels of liquidity.
“While this might be advantageous from an efficiency standpoint (due to economies of scale), it raises considerable concerns regarding the implications of a failure or malfunction at a major asset or exchange for the wider crypto ecosystem,” the ESMA said.
An examination of the fiat currencies employed within the crypto market revealed a strong dependence on USD and the South Korean won. Meanwhile, the Euro plays a comparatively insignificant role, accounting for about 10% of transactions.
Additionally, it observed that Markets in Crypto Assets (MiCA) regulation has not, to date, resulted in any observable increase in the use of the Euro within the cryptocurrency market.
Notwithstanding the current lack of impact, the ESMA expects that MiCA could emerge as a potential catalyst for growth upon its implementation in 2024. This anticipated effect stems from MiCA’s focus on strengthening investor protection within the market.
Further, the ESMA challenged the notion of crypto assets acting as a safe haven during periods of broader market distress. Its report identified a degree of co-movement between crypto assets and equities, while also highlighting the absence of a consistent relationship with gold, a
