The World Federation of Exchanges (WFE) has put forth its recommendations for the digital asset industry amidst rising user adoption and regulatory concerns.
In a press release dated September 28, the exchange consortium highlighted six key suggestions for the industry and regulatory bodies. These recommendations aim to assuage user concerns, especially as some of WFE’s members are integrating blockchain technology and introducing digital assets alongside their conventional offerings.
The organization emphasized the need for authorities to implement existing standards to the advantage of all involved parties.
The WFE stated, “By harnessing regulatory principles that are rooted in long-standing, trustworthy market frameworks, governments and regulators can bolster the growth of the crypto-trading domain, safeguarding investors and ensuring markets are conducted in an orderly, fair, and transparent manner.”
Six recommendations by the WFE
Foremost on their recommendation list is the need to delineate market infrastructure roles to prevent crypto trading platforms (CTPs) from trading in ways that might conflict with their clients’ interests.
Next, regulators are encouraged to establish mechanisms that monitor broader risks in order to shield users, particularly in markets where prices play a decisive role.
A recent incident that remains a poignant reminder for digital asset enthusiasts is the decline of the algorithm-based stablecoin TerraUSD and its subsequent impact on the broader Terra ecosystem.
The other stipulations they put forth are:
- Maintaining adequate financial resources to withstand anticipated operational challenges.
- Ensuring adherence to best execution standards.
- Strengthening the criteria for listings.
- Implementing suitable governance and management protocols.
It’s significant to highlight that after the setback faced by FTX in November 2022, the majority of centralized crypto exchanges have begun publishing periodic proof-of-reserves. This demonstrates that user assets are fully backed on a 1:1 basis, ensuring they can be safeguarded in case of unforeseen complications.
The organization emphasized that crypto platforms should refrain from labeling themselves as “exchanges” unless they undergo appropriate regulatory oversight to mitigate recurring challenges. Additionally, these platforms must be transparent about the regulatory standards they adhere to across all aspects of their operations.
Exchange body sees promise in crypto
The WFE holds a positive outlook towards the digital asset market, asserting that decentralized finance (DeFi) promises numerous groundbreaking contributions to conventional financial instruments.
Nevertheless, they cautioned that many projects purporting to be decentralized might not genuinely adhere to this principle, potentially paving the way for increased susceptibility to scams.
Nandini Sukumar weighed in on the report, underscoring the importance for cryptocurrency exchanges to embrace the outlined six recommendations.
“The exchange sector remains confident in the potential of cryptocurrency trading and digital assets. We’re actively collaborating with all relevant parties to elevate market structures and standards to a level that bolsters growth and instills trust in these domains,” he further elaborated.
With the rise in crypto adoption, there’s a noticeable uptick in interest from institutional investors, as evidenced by the recent push towards ETFs and tokenization.
A contemporary study by Coalition Greenwich reveals that almost half, 48%, of asset managers now provide digital asset services, with several others contemplating the integration of such offerings in the foreseeable future.