The World Federation of Exchanges published research paper 'A review of crypto-trading infrastructure', the first of a two-part research project which analyses exchange engagement with crypto market developments. The paper’s objective is to improve understanding of the benefits and risks of crypto market infrastructures and how they function.
The paper presents the results of a survey that the WFE conducted among its members and affiliates in 2022. It provides a snapshot of the evolution of crypto-trading platforms across different jurisdictions and reports the exchanges’ engagement with these developments and their views on the future opportunities or challenges that these new technologies bring.
It also provides an overview of the setup and operation of crypto-trading platforms, contrasting the models of centralised platforms (CEXs) with those of the decentralised platforms (DEXs). The paper looks at the implications that the differences in model design between DEX and CEX have on liquidity provision, price discovery and the custody of assets; and reviews the academic literature findings about the market microstructure of these platforms. In addition, the paper discusses what these differences may imply in terms of three fundamental aspects of financial markets regulation: anti-money laundering, prudential regulation and financial stability, and investor protection.