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In 2022, the World Federation of Exchanges (WFE) oversaw transactions worth a staggering $140 trillion. However, as its members embrace Distributed Ledger Technology (DLT), the WFE finds itself wrestling with concerns. 
The WFE envisions a future where Crypto-Asset Trading Platforms (CTPs) play a more substantial role in the tangible economy and society at large. In a report released on September 28th, the WFE didn’t mince words regarding CTPs, offering pointed insights and recommendations. 
The WFE boldly suggests that CTPs should embrace a measure of regulation to enhance the attractiveness of their markets. In this regard, they propose six guiding principles for regulating CTPs. The foremost among these principles is the segregation of functions to prevent trading against their own customers—an issue that Gary Gensler, Chairman of the United States Securities and Exchange Commission, frequently emphasizes. Until these standards are met, the WFE asserts that CTPs should refrain from labeling themselves as exchanges. 
Furthermore, the WFE expresses reservations about the integration of Distributed Ledger Technology (DLT) into the traditional Financial Exchanges (TradFi) it represents. Regulators are urged to contemplate the mutual benefits of such integration. In their own words: “If regulated institutions are barred from offering services related to crypto assets, it could inadvertently drive this business away from those who possess the expertise to manage it effectively, ushering it into the shadows where inexperienced newcomers might take the reins.” 
The WFE also highlights a “classic financial services collapse” experienced by FTX, unrelated to the crypto industry itself. 
When it comes to Decentralized Finance (DeFi), the WFE acknowledges that it operates with subtle differences compared to Traditional Finance (TradFi) and Centralized Finance (CeFi). Nevertheless, they underline that any platform where buyers and sellers converge inherently functions as a central entity. They offer the example of the Ethereum Merge, which saw the network’s transition from a Proof-of-Work to a Proof-of-Stake consensus mechanism, largely driven by the centralized Ethereum Foundation. The WFE proposes that regulation could be applied at the level of Decentralized Applications (DApps) but not at the protocol level. 
In a commendable gesture, the WFE lauds the Financial Action Task Force’s (FATF) endeavors to apply Know Your Customer (KYC) regulations, often referred to as the “travel rule,” to the realm of cryptocurrencies. Additionally, they lend their support to the International Organization of Securities Commissions (IOSCO) Principles for Secondary and Other Markets, aimed at elevating standards within the crypto market landscape. 
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Exchanges Federation promotes regulation of cryptocurrency trading and connection with TradFi

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