Crypto trading is currently spread across a few centralized exchanges, with Binance alone claiming almost half of the market. The European Securities and Markets Authority (ESMA) has now issued a detailed warning about the associated risks study. It comes to the conclusion that around 90 percent of all crypto trades are processed by just ten different exchanges. While this concentration could improve market efficiency, it also raises concerns about the consequences of a major crypto exchange outage or technical disruption.
According to ESMA, it is still difficult to determine the origin of orders or the exact geographical location of crypto exchanges. Providers with an EU license are responsible for 55 percent of the global trading volume. However, most trades outside the euro area take place on crypto exchanges located in tax havens such as the Seychelles. The concentration risk has actually increased in recent years. After ESMA data The top 5 crypto exchanges only captured 54 percent of the market in 2019, but now they have a full 73 percent.
MiCA has not yet strengthened the European business location
The report also states that the euro has little presence in crypto trading despite the announced MiCA regulation. Since the comprehensive crypto regulatory regulation improves investor protection, it could become a growth engine after its implementation in 2024, according to ESMA. MiCA applies to all crypto assets, including securities and e-cash, which do not fall under traditional EU financial regulations. It therefore creates regulatory clarity in the crypto sector.
Fiat-crypto trading volumes reflect inflows and outflows into and out of the crypto asset market. However, only 20 to 30 percent of all transactions involve fiat currencies and around 80 percent of these involve the US dollar or the South Korean won. The euro only plays a minor role.
ESMA study “Crypto assets: Market structures and EU relevance”
What the authors of the study also emphasize: Contrary to common claims, crypto assets are not a safe haven in times of greater volatility. According to a report from Reuters In any case, the global market leader remains relaxed in view of the ESMA warning. “Our focus remains on […] Investing in compliance processes for a new era of regulatory security,” says Binance. On April 30th, the criminal conviction of the founder and former CEO Changpeng “CZ” Zhao is due in the United States.
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