WFE Report Shows 40% of Crypto Trading Platforms are Decentralized, Retail Demand Grows
Summary:
A report by the World Federation of Exchanges (WFE) reveals that 40% of crypto trading platforms are decentralized, while 60% use Central Limit Order Books (CLOBs) like regulated exchanges. The report also highlights the growing demand for crypto-related products and services among retail investors, particularly for custody services. However, both centralized and decentralized platforms have struggled to implement know-your-customer requirements due to the lack of uniform crypto regulations.
According to the World Federation of Exchanges (WFE), 40% of crypto trading platforms are decentralized and utilize distributed ledger technology, while the remaining 60% rely on Central Limit Order Books (CLOBs) similar to regulated exchanges. The WFE's report reveals that there are currently 500 crypto trading platforms offering a variety of crypto-related products and services. The survey, which involved several crypto platforms, provided insights into the demands of both retail and institutional investors. Interestingly, many crypto platforms choose to utilize an off-chain CLOB system for price information, quote display, and order execution, using blockchain only for settlement and custody purposes. This approach saves on transaction costs as traders do not directly interact with the distributed ledger technology. Platforms following this model are referred to as centralized platforms (CEX). The report also highlights that retail demand for crypto-related products and services is generally higher than institutional demand, except when it comes to custody services. Institutional investors have demonstrated a greater need for crypto custody services. The report suggests that retail customers may be less aware of the importance of investor protection compared to institutional investors. The report also reveals that centralized exchanges enjoy higher trading activity despite decentralized platforms offering lower transaction fees. It further notes that different platforms may have varying prices for the same trading pairs, leading to arbitrage opportunities, highlighting potential inefficiencies in the crypto market. Additionally, the report emphasizes that both centralized and decentralized platforms have struggled to implement know-your-customer requirements due to the absence of uniform crypto regulations.
Published At
9/5/2023 1:58:40 PM
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