The European Union's securities regulator has raised concerns about the high concentration of trading activity on a limited number of cryptocurrency exchanges. Binance, in particular, controls approximately half of the entire market, according to a report released on Wednesday by the European Securities and Markets Authority (ESMA).
The analysis conducted by ESMA revealed that just 10 exchanges handle around 90% of all cryptocurrency trades.
Additionally, the report highlighted significant disparities in market liquidity, with larger exchanges typically exhibiting higher liquidity levels.
ESMA expressed concerns about the potential implications of a failure or malfunction at a major asset or exchange for the broader cryptocurrency ecosystem, despite the potential efficiency advantages stemming from economies of scale.
MiCA Regulation Has Not Yet Increased Crypto Adoption in Europe
An analysis of the fiat currencies utilized in the cryptocurrency market revealed a heavy reliance on the US dollar (USD) and the South Korean won, while the Euro's role is relatively minor, accounting for approximately 10% of transactions.
Furthermore, it was noted that the Markets in Crypto Assets (MiCA) regulation has not yet led to any discernible increase in the use of the Euro within the cryptocurrency market.
Despite the current lack of impact, the European Securities and Markets Authority (ESMA) anticipates that MiCA could serve as a potential catalyst for growth once it is implemented in 2024. This expected outcome is attributed to MiCA's focus on enhancing investor protection within the market.
Crypto's Safe-Haven Status Is Contested by ESMA
Additionally, the European Securities and Markets Authority (ESMA) questioned the idea of crypto assets serving as a safe haven during times of broader market turmoil.
The report noted a level of correlation between crypto assets and equities, while also pointing out the lack of a consistent relationship with gold, which is traditionally viewed as a safe-haven asset.
April 2024, Cryptoniteuae