WFE Advocates Regulation for Crypto Trading Platforms, Discusses Decentralized Finance
Summary:
The World Federation of Exchanges (WFE) asserts that crypto trading platforms (CTPs) could significantly impact the economy and society. The WFE emphasizes that CTPs should welcome regulation to increase their market appeal and should fulfill certain criteria before considering themselves exchanges. It discusses the integration of distributed ledger technology into traditional finance and the possible ramifications of barring regulated institutions from crypto services. The WFE also touches on decentralized finance, arguing that its structure is not significantly different from traditional forms and that regulations could be applied at the DApps level instead of the protocol. It applauds efforts to apply Know Your Customer regulations to crypto and supports initiatives to raise standards on crypto markets.
The Global Association of Securities Exchanges (WFE) believes that crypto trading platforms (CTPs) can significantly impact both the economy and society as a whole. On September 28, the WFE bluntly assessed CTPs and furnished regulatory recommendations in a published document. "CTPs can strengthen their market appeal through embracing some regulatory oversight," the WFE stated. It proposed six regulatory principles for CTPs, starting with function segregation to prevent trading against their clients, an issue commonly raised by Gary Gensler, the chairman of the US Securities and Exchange Commission. Until these criteria are met, the WFE advises CTPs against referring to themselves as exchanges.
The WFE is cautious regarding the implementation of distributed ledger technology (DLT) within traditional finance exchanges, and prompts regulators to consider DLT's potential mutual benefits. The WFE warns that if regulated institutions are barred from offering crypto services, such business may clandestinely shift to newcomers with little experience. For instance, FTX's recent woes were indicative of a typical financial services collapse rather than an issue unique to the crypto industry.
The WFE also discussed decentralized finance (DeFi) asserting it is fundamentally no different from Traditional Finance (TradFi) and Centralized Finance (CeFi). It emphasized that any location facilitating buyer-seller transactions inherently possesses a centralized aspect - the Ethereum transition from proof-of-work to proof-of-stake consensus was primarily driven by Ethereum foundation's centralized team. According to the WFE, regulation could potentially focus more at the DApps (decentralized applications) level than at the protocol.
The WFE commends the Financial Action Task Force's (FATF) initiative to implement Know Your Customer regulations on crypto, known as the travel rule, and supports the IOSCO Principles for Secondary and Other Markets in enhancing standards in crypto markets. The WFE heavily underscores the six principles recommended for CTPs, insisting these standards are imperative for any CTPs aiming for credibility in today's markets.
Published At
9/28/2023 9:39:41 PM
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