EU securities watchdog raises concerns over high concentration in crypto trading on major exchanges

The European Securities and Markets Authority (ESMA) has raised concerns about the high concentration of crypto trading on a few exchanges, with Binance alone accounting for about half of the market. This has led to worries about the potential impact of a failure on the sector.

The EU is rolling out the world’s first comprehensive set of rules to regulate trading in cryptoassets such as bitcoin, Ether, and Tether, requiring exchanges to be authorized. ESMA’s analysis found that the euro currency plays only a minor role in these trades.

Trading volumes are highly concentrated, with 10 exchanges processing about 90% of trades, and Binance being the largest player in the market. ESMA highlighted the increased market concentration over time and the potential implications of a failure at a major asset or exchange for the wider crypto ecosystem.

Binance responded by stating that it is committed to the healthy and sustainable growth of the crypto industry, and is focused on investing in compliance processes for a new era of regulatory certainty.

Despite bitcoin reaching an all-time high in March, the total value of all cryptocurrencies still represents a small fraction of the global financial system. ESMA also noted challenges in identifying the origin of order flow or the geographic location of crypto exchanges, with many transactions occurring outside the EU in tax havens.

ESMA will be holding a webinar on April 25 to discuss its findings further. The news has sparked discussions about the future of crypto trading and the need for regulatory oversight in the rapidly evolving market.