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Retail Investors Driving Demand for Crypto Services: World Federation of Exchanges

A World Federation of Exchanges report aimed at analyzing cryptocurrency exchange engagement found retail demand for cryptocurrency-related services and products is actually greater than institutional demand in nearly every use case.

The exception, notes the report, is with respect to custody services where demand for such is more pronounced with institutions than retail customers. Additionally, the report indicates approximately 40% of all cryptocurrency trading platforms function as decentralized entities, and 60% of all crypto platforms rely on Central Limit Order Books (CLOBs) to execute trades much like those deployed in other more traditional regulated exchanges.

Per Nasdaq, CLOBs act as a hub for sellers and buyers and submit trade orders and, as such, serve as a mechanism to facilitate trades between them. Matches are made based on a predetermined set of rules and then executed according to those rules, notes the exchange.  

Additionally, notes the World Federation of Exchanges report, many of the decentralized exchanges surveyed operate using “DLT-based Automated Market Making” to set prices and generally provide anonymity to their users through access to self-custodial wallets. “There is a growing demand for crypto products and services. Crypto-related innovations are seen as an opportunity to advance technology development and increase investor choice, however, the lack of minimum governance and investor protection standards of unregulated crypto platforms, as well as the high volatility observed in these markets, and the risk of cybersecurity threats, is a concerning mix,” said Pedro Gurrola-Perez, head of research at the World Federation of Exchanges.

The report includes a glimpse at the some 500 trading platforms operating around the world. Many of these platforms also offer other related services and products, it adds.

From X (formerly Twitter)

BizToc @biztoc ·Sep 2 Replying to @markets

"Interesting to observe Tether’s market cap wild ride. This implies a shift in investors’ preferences, possibly to more regulated or trustworthy stablecoins. Greater diversity in the stablecoin market hints at improved resilience in the crypto market's infrastructure."

The survey report also noted a dozen of the regulated exchanges included said they offer crypto products like stablecoins and tokens in response to “the increasing demand from investors, especially from the retail segment.”

Those included in the survey also indicated they believe the crypto market represents an opportunity for the development of technology as well as an avenue to bolster investor choice. However, there were several notable concerns raised by principal stakeholders regarding the absence of uniformity with respect to regulatory standards, cybersecurity threats and market volatility.  

“Crypto is at the forefront of all of our members’ minds and we are in constant dialogue with them about how to capitalize on the new opportunities in the area. As this industry and market matures, coming in to the mainstream of financial markets, the exchange-traded model which places investor trust, transparency, accountability and investor protection at the heart of platform, will gain further momentum,” said Nandini Sukumar, CEO of the World Federation of Exchanges.

A full copy of the report can be downloaded here.

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