Hey folks.
The extremely concentrated nature of cryptocurrency trading and the potential risks it poses to the larger financial ecosystem have been brought to light by the European Securities and Markets Authority (ESMA).
The research by ESMA points that around 90% of crypto transactions are done by only 10 exchanges with Binance the largest among them is leading half of the market.
The first comprehensive regulatory framework for digital assets in the world known as MiCA, is about to be implemented by the European Union (EU).
While the efficiency may be improved by such concentrations but it also raises concerns about the repercussions of a significant exchange failure or crash.
According to ESMA the concentration is a concern because of the failure of a single asset or exchange could impact the crypto space broadly.
However, with the passage of time this concentration has grown. It was at 54% in 2019 and as per a latest data by ESMA, it jumped to 73%.
The research also emphasizes that even with the release of the MiCA law, the euro is not widely used in crypto trading. But since its goal is to improve investor protection, once it's put into effect in 2024, it might be a growth engine.
As the comprehensive regulatory framework is being rolled out by the European Union for Crypto Assets MiCA, the findings by ESMA highlights the significance of oversight and risk management in this rapidly evolving industry.
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