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Traditional Financial Exchanges Divided on Crypto Services, Reveals WFE Survey

CryptoTraditional Financial Exchanges Divided on Crypto Services, Reveals WFE Survey

A recent survey by the World Federation of Exchanges (WFE) has shed light on the mixed opinions within traditional financial exchanges regarding the adoption of crypto services. The survey, conducted between May and July 2022, included 29 member exchanges and revealed that 41% of them currently offer crypto-related products or services. In contrast, over a third of these exchanges have no intentions of entering the crypto space.

The research conducted by WFE is part of a broader initiative to understand the crypto market infrastructure and its implications for the traditional financial sector. It explores various aspects, including liquidity provision, price discovery, and regulatory concerns such as anti-money laundering and investor protection.

One notable finding is that retail demand for crypto-related products surpasses institutional demand in most cases, except for custody services.

The survey also provides insights into how exchanges in different jurisdictions engage with the crypto market. It distinguishes between centralized platforms (CEXs) and decentralized platforms (DEXs), noting that around 60% of crypto-trading platforms utilize Central Limit Order Books (CLOBs) to facilitate trading. CLOBs are designed on centralized servers rather than blockchain to ensure efficiency and transparency. Conversely, decentralized platforms often employ Distributed Ledger Technology (DLT)-based Automated Market Making protocols to establish prices. Centralized exchanges are generally considered to offer better liquidity and price discovery due to their use of CLOBs, while decentralized exchanges, while offering user anonymity, may lack in liquidity and price discovery.

The survey arrives at a time when global regulators are grappling with how to approach the expanding crypto market. Concerns about regulatory authorization, transparency, and the volatile nature of cryptocurrencies have raised doubts about the quality and stability of these markets. Consequently, traditional financial exchanges exhibit cautious optimism but remain divided regarding the full adoption of crypto services.

Seven of the surveyed exchanges have plans to introduce crypto-related services in the future, indicating a growing interest in integrating cryptocurrencies into traditional financial systems. However, the reluctance of over a third of the surveyed exchanges to enter the crypto services arena underscores the persistent regulatory and stability concerns.

By FCCT Editorial Team

Disclaimer: The views expressed in this article are independent views solely of the author(s) expressed in their private capacity.

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