Decentralized Finance: Regulating Cryptocurrency Exchanges

Global financial markets are in the midst of a transformative movement. The creation Bitcoin and Facebook’s proposed distribution Diem mark watershed moment evolution ecosystem. Purportedly, peer-to-peer distributed digital ledger technology eliminates legacy market intermediaries such as investment banks, depository exchanges, clearinghouses, broker-dealers. Yet careful examination reveals that cryptocurrency issuers firms offer secondary trading services have not quite lived up to their promise. Notwithstanding cryptoenthusiasts’ calls for disintermediation, evidence platforms facilitate frequently employ long-adopted intermediation practices traditional counterparts. In fact, when emerging technologies fail, cryptocoin token partner with rely on firms. As result, these face many risk-management threats plagued conventional institutions well host underexplored threats. Automated or algorithmic strategies, accelerated high frequency tactics, sophisticated Ocean’s Eleven-style cyberheists leave crypto investors vulnerable predatory practices. Early responses fraud, misconduct, manipulation emphasize intervention originators first distribute cryptocurrencies— initial coin offerings. This Article rejects dominant regulatory narrative prioritizes oversight primary transactions. Instead, this proposes regulators introduce formal registration obligations —the exchange provide marketplace trading. approach recognizes dynamic nature actors seeking achieve disintermediation yet balances potential benefits normative goals—protecting from theft, manipulation; enforcing accountability; preserving integrity; addressing enterprise systemic risk management concerns