Crypto-asset exchanges will slowly come to resemble trading platforms of the traditional financial world, say the Financial Times (FT), the preeminent London-based financial paper, after canvassing the nascent crypto industry and those coming into it from traditional finance.
Citing the findings of a report by the Office of the Attorney General to the state of New York (OAG), the FT article proposed that “the crypto market is only at the early stages in its maturation”.
The OAG report paints a picture of crypto-asset exchanges coming to grips with a new frontier, and varying widely in their implementations and functions -- and in what the OAG consider the “integrity” of the respective platforms.
Soliciting responses from some of the biggest virtual currency trading platforms, the OAG were interested to learn the platforms’ standards regarding such topics as jurisdiction, fees, acceptance policies of fiat currency, security and insurance, employees’ trading practices, algorithmic/API trading high frequency trading (more commonly known in the crypto industry as “bots”), and Know-Your-Customer (KYC) standards.
Potential Conflicts of Interest
Conflicts of interest between platforms and their users, security of funds, and the prevention of “abusive trading activity” are the highest priority concerns addressed in the report.
The multiple roles played by trading platforms -- as exchanges, brokers, money-changers, proprietary traders (the trading platform’s operators trading on behalf of themselves for profit), and even issuers of proprietary digital tokens, all at once -- are said to potentially foster conflicts of interest; and the lack of industry-standard KYC is cited as breeding abusive trading practices.
It is worth noting that many of the OAG’s desires, such as prevention of Virtual Proxy Networks and thorough identification of users, are exactly the type of commitments many users in the cryptocurrency and cryptoasset world are intent on avoiding.
The FT piece comes after a damning report regarding foul play on cryptoasset trading platforms -- especially BitForex -- which detailed wash trading and fake trade volume