MiCA Has Had Little Impact on Crypto Activity, Says Regulator

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  • Europe’s MiCA regulation hasn’t led to increased euro volumes in crypto trading, according to the EU market regulator
  • The ESMA suggests that MiCA regulations might drive growth post-2024 once it is fully implemented
  • Binance remains a dominant player in the crypto scene while stablecoin usage is on the rise

Europe’s new Markets in Crypto-Assets (MiCA) regulation has “not caused an increase in euro volumes” of crypto trading, according to the first report following its passing. The report, published yesterday by the European market regulator, the European Securities and Markets Authority (ESMA), added that the regulations “could constitute a potential growth driver once implemented in 2024,” with enhanced investor protection seen as the honey that will eventually attract the bees. The study also found other interesting trends, including the continued dominance of Binance despite its troubles and the rise in stablecoin usage across all exchanges. 

Dollar and Won Dominate Transactions

MiCA was ratified in April last year following years of negotiations, but ESMA found that it hasn’t precipitated a noticeable increase in usage within the bloc:

The distribution of involved fiat money reflects a high reliance on the US dollar and the South Korean won as the market’s on- and off-ramp. The euro only plays a minor role and the announcement of the MiCA regulation has not caused an increase in euro transactions so far.

ESMA’s study uncovered a notable concentration within the crypto market, both in terms of assets and exchanges, with a few key players hoovering up most of the action. This, it warns, “raises considerable concerns regarding the implications of a failure or malfunction at a major asset or exchange.”

Binance Still Rules the Roost

Examining the fiat-crypto trading landscape, ESMA found that, alongside the dominance of the US dollar and South Korean won in transactions, stablecoins also play a crucial role, accounting for over 60% of all such transactions. Tether remains the dominant player in the stablecoin scene, both in terms of usage and market cap, it also reported that stablecoins have “historically shown significant fluctuations from their peg” despite their intended stability.

The study also shed light on the regulatory landscape surrounding crypto exchanges, noting that many are domiciled in countries often labeled as tax havens. Market concentration among exchanges has increased over time rather than decreased, with Binance alone commanding more than 50% of trading volume, despite the regulatory issues that continue to plague it.

Thousands of exchanges, both centralized and decentralized, have entered and departed the scene since Binance’s emergence in 2017, showing that it has managed to fight off all the competition so far in spite of its challenges.