ESMA airs deep concerns over proportion of crypto trading on big exchanges

THE European Securities and Markets Authority says it has growing concerns over the concentration of trading on the largest crypto exchanges.

The EU securities watchdog warns the impact of a collapse for a large exchange - such as the fall of FTX two years ago - would be devastating.

Its also points out Binance alone accounts for almost 50 per cent of digital asset holdings by EU citizens.

As the authority prepares to roll out its detailed regulations surrounding crypto assets, ESMA has been compiling a comprehensive analysis on what the EU's population is trading in and where it is trading.

Data shows trading volumes are concentrated largely on exchanges, with 10 platforms accounting for almost 90 per cent of digital asset holdings.

"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," ESMA's analysis stated.

"We observe that the market concentration among exchanges has increased over time, and that Binance alone accounts for more than 50% of trading volume."

The report also highlighted that the majority of transactions were made outside of the European Union, on exchanges based in tax havens.

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