The European Union's securities watchdog, the European Securities and Markets Authority (ESMA), has expressed concern about the high level of concentration in cryptocurrency trading. Binance, one of the leading crypto exchanges, alone accounts for more than half of the market. According to the institution, this concentration could have significant consequences for the sector in the event of a malfunction or disruption.
“While this may be advantageous from an efficiency perspective due to economies of scale, it raises significant concerns regarding the effects of a malfunction or malfunction of a major asset or exchange on the wider crypto ecosystem,” ESMA said in a detailed overview of the market.
In regulatory proposals published in recent weeks under the digital assets law known as Crypto-Asset Markets (MiCA), ESMA had described Miner's Minerable Value (MEV) as potentially suspect. MEV generally involves trading strategies in which blockchain operators, companies and individuals adding blocks to the chain preview the network's transaction queue in order to generate extra profits for themselves.
MiCA legislation, completed last year, makes the EU the first major jurisdiction to comprehensively regulate the emerging digital assets sector. ESMA and the European Banking Authority (EBA) are advising on the measures and guidance they should issue under MiCA.
*This is not investment advice.