The Paper’s objective is to improve understanding of the benefits and risks of crypto market infrastructures and how they function.

The WFE Research paper analyses exchange interaction with the evolution of crypto-trading platforms across various jurisdictions and the opportunities or challenges that these new technologies bring. 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.

Crypto-trading platforms have operated without the standards required from established public financial markets and with very little regulatory oversight. The WFE Research paper, titled, ‘A review of crypto-trading infrastructure’, studies how this offers a greater opportunity for illegal financial activities and the consequences for market integrity, and for investor protection.

The paper finds that 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 decentralised platforms (DEX) and centralised platforms (CEX) have on liquidity provision, price discovery and the custody of assets. It also analyses what these differences imply for fundamental aspects of financial markets regulation: anti-money laundering, prudential regulation, investor protection, and may imply for financial stability.

Dr Pedro Gurrola-Perez, Head of Research at the WFE, said: “There is a growing demand for crypto products and services. 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.”

Nandini Sukumar, CEO of the WFE, said: “Crypto is at the forefront of all of our members’ minds and we are in constant dialogue with them about how to capitalise on the new opportunities in the area. As this industry and market matures, coming in to the mainstream of financial markets, the exchange-traded model which places investor trust, transparency, accountability and investor protection at the heart of platform, will gain further momentum. ”