Federation of exchanges touts crypto trading regulation, integration with TradFi
The World Federation of Exchanges (WFE) sees the potential of crypto-asset trading platforms (CTPs) to play a major role in the “real” economy and society at large. A paper released on September 28 had some clear observations about CTPs and recommendations for regulators.
“CTPs should accept the standard as an average[s] In order to strengthen their market appeal, WFE wrote. He suggested six principles for managing CTP. The first of these is the separation of duties to avoid trading with clients, a complaint that US Securities and Exchange Commission Chairman Gary Gensler often voices. CTPs should not call themselves exchanges until they meet those standards, the trade association says.
WFE was concerned about the integration of distributed ledger technology (DLT) into the TradFi exchanges represented. Regulators should consider the mutual benefits of that integration;
“If the regulatory institutions make it impossible to carry out services in crypto assets, it will take them away from institutions that know how to run this business properly and into the shadows, which can be led by new entrants with limited experience.”
FTX has experienced a “normal financial services downturn” unrelated to the crypto industry, WFE said.
Related: 40% of crypto trading platforms are decentralized: World Exchange Federation
He had a lot to say about decentralized finance (DeFi):
“DeFi seems to work differently [from TradFi and CeFi] But the differences are not as extreme as they seem. […] The platform where buyers and sellers meet is essentially a central element.
For example, Ethereum integration — the network's transition from proof-of-work to proof-of-consensus — “was largely led by a centralized team within the Ethereum Foundation. The regulation could be applied at the DApps level, but not the protocol, WFE suggested.
The World Exchange Federation has proposed 6 key principles for crypto trading infrastructure – “These six key principles should be the checklist of any CTPs that meet the requirements of a trusted market operator. Complying with the requirements… pic.twitter.com/drYRne2bZL will not
— Industry Spread (@industryspread) September 28, 2023
The WFE's Financial Action Task Force applauded efforts to codify the Know Your Customer rules – the so-called travel rule – and endorsed IOSCO's secondary and other markets principles to boost crypto markets.
Magazine: Deposit Risk: What do crypto exchanges do with your money?
