The article provides insights on ESMA’s understanding of crypto-asset trading, how crypto-asset markets compare to traditional financial markets and key areas of risks to consumers and market and financial stability. The contents of the article are intended to support the implementation of EU Regulation 1114/2023 on markets in crypto-assets (MiCA).

Key findings include:

• Bitcoin (BTC), Ether (ETH) and the stablecoin Tether (USDT) – account for 74 per cent of the total crypto market capitalisation as of December 2023 and 55 per cent of the 2023 annual trading volume.
• The historic correlation between Bitcoin and the S&P 500 have declined over the course of 2023.
• Around 70 per cent to 80 per cent of secondary market transactions occur between crypto assets and other crypto assets or stablecoins, ie they do not involve any fiat currency.
• US Dollar and Korean Won account for around 80 per cent of fiat-to-crypto transactions. The Euro plays only a minor role, with a relatively stable share of around 10 per cent. The enactment of MiCA has not caused an increase in Euro volumes, but could constitute a potential growth driver once its rules come into force in the course of 2024.
• Stablecoins form part of over 60 per cent of all transactions. USD-denominated stablecoins dominate the market. Euro-denominated stablecoins remain negligible at present, with a combined value below €500 million.
• More than 50 per cent of trading volume happens on crypto exchanges located in jurisdictions referred to as “tax havens”.
• Liquidity and trading volumes are concentrated in a few exchanges.
• US enforcement actions against larger exchanges has shifted some of the trading volume to smaller crypto exchanges.

ESMA’s article can be found here.

If you are unsure whether MiCA may apply to you, you can use our MiCA Assessment Tool to obtain a free preliminary assessment here.