WFE regulation focuses on risks of unregulated crypto-trading platforms
The World Federation of Exchanges (WFE) has published six recommendations for regulatory authorities and crypto-trading platforms, which should:
- where applicable, separate market infrastructure functions within a CTP;
- ensure proper functioning of the markets by having in place systems and controls covering broader risks such as abusive trading, in order to protect the integrity of price formation;
- have sufficient financial resources to meet the expected operational stress events;
- facilitate compliance with the requirements of best execution;
- increase the robustness of listing standards;
- have appropriate requirements in place in relation to management.
The WFE has also published a study on crypto-currencies which has found that the risks brought by unregulated crypto-trading platforms are exacerbated due to the fact that those platforms often carry on additional activities that would not be allowed, or would be strictly regulated, in mainstream public markets.
Richard Metcalfe, head of regulatory affairs at the WFE, points out that ‘a lot of participants in crypto might wrongly assume that all the checks and balances that exist when you would go and trade shares on a properly regulated market, or indeed pretty much any other established financial asset, would be in place. They might take for granted the sort of things that you would get in that predefined environment but they wouldn't necessarily be in place.’
The WFE hopes that their recommendations are going to be taken into consideration by regulators across the globe.
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