LONDON—The World Federation of Exchanges (WFE), the global industry group for exchanges and central counterparties, has published the first of a two-part research project that analyzes exchange engagement with crypto market developments.
The paper’s objective is to improve understanding of the benefits and risks of crypto market infrastructures and how they function, according to a report by Finextra.
“The WFE Research paper analyzes exchange interaction with the evolution of crypto-trading platforms across various jurisdictions and the opportunities or challenges that these new technologies bring,” Finextra reported. “It studies how demand for crypto-related products and services is changing, and how regulated exchanges are responding to the opportunities and challenges posed by these technologies, including with the creation of regulated crypto-trading exchanges or the provision of crypto-related services, Finextra said.”
Additional Findings
Finextra said the paper has also found the risks that unregulated crypto-trading platforms bring are compounded by the fact that they frequently carry out further activities that would not be permitted, or would be closely regulated, in mainstream public markets.
“The Research studies the implications that the differences in model design between decentralized platforms (DEX) and centralized platforms (CEX) have on liquidity provision, price discovery and the custody of assets,” Finextra stated.
The report further noted the paper also analyzes what these differences imply for fundamental aspects of financial markets regulation: anti-money laundering, prudential regulation, investor protection, and may imply for financial stability,” Finextra noted.
‘Growing Demand’
“There is a growing demand for crypto products and services,” stated Dr. Pedro Gurrola-Perez, head of research at the WFE, according to Finextra. “Crypto-related innovations are seen as an opportunity to advance technology development and increase investor choice, however, the lack of minimum governance and investor protection standards of unregulated crypto platforms, as well as the high volatility observed in these markets, and the risk of cybersecurity threats, is a concerning mix.”
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