WASHINGTON–A new Treasury analysis reveals how quickly trading in digital assets has grown, finding that volume was approximately $2 trillion in 2021, up from $100 billion just three years earlier.
The report, published by Treasury’s office of Financial Research (OFR), said the trading is highly concentrated, but while the number of companies engaged in trading of digital assets has grown, there remains limited oversight of those swapping the assets.
The “high degree of market concentration” is accompanied by major intermediaries accounting for most of transaction volumes and holding the largest amounts of customer digital assets, the OFR report states, before adding there are “significant data gaps” that remain regarding oversight of digital asset intermediaries.
In addition, the report further found there is little oversight of the financial stability risks that may emerge from the trading of digital assets.
The Findings
Among the findings, according to the OFR:
- There were two-billion transactions of digital assets totaling $1.4 billion in 2021, up from $193 billion via 586 million transactions, respectively, in 2021. “But that number was dwarfed by activity in the last quarter of 2021, when virtual currency transactions totaled $367 billion. During that period, the mean company reporting was $4.7 billion in transactions,” Treasury said. “Virtual currency held on behalf of customers also increased rapidly in 2021, jumping to $240 billion at year-end from $60 billion one year prior,
- At year-end 2021, more than 96% of all activities, or $356 billion of the $367 billion in transactions in the fourth quarter, were conducted by the top quartile of firms, revealing the concentration of volume
- “These firms also held the majority of digital assets, with over $11 billion reported in Q4 2021, or roughly 65% of total digital assets across all companies in our sample,” the report states. “Of the $240 billion in virtual currency held on behalf of customers, $204 billion was held by the five largest firms, again illustrating the high degree of concentration.”
The full report can be found here.
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