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The World Federation of Exchanges (WFE) has highlighted the growing potential of crypto-asset trading platforms (CTPs) in contributing to the broader economy and society. 
In a paper released on September 28, the WFE emphasized the need for regulation to enhance the appeal and legitimacy of these platforms. 
One of the primary principles proposed by the WFE is the segregation of functions within CTPs to prevent conflicts of interest, a concern echoed by Gary Gensler, the Chairman of the United States Securities and Exchange Commission. 
Until CTPs adhere to these standards, the WFE recommends that they refrain from referring to themselves as exchanges. 
The WFE also expressed concerns about the integration of distributed ledger technology (DLT) into traditional financial (TradFi) exchanges it represents. 
Regulators are urged to consider the mutual benefits of this integration, rather than stifling regulated institutions from offering crypto asset services, potentially pushing such activities into less-regulated spaces. 
Regarding decentralized finance (DeFi), the WFE noted that although it operates differently from traditional and centralized finance (TradFi and CeFi), the distinctions are not as pronounced as they might seem. DeFi platforms, where buyers and sellers interact, inherently possess central elements. 
The WFE pointed out that even the Ethereum Merge, which transitioned the network from proof-of-work to proof-of-stake, was largely driven by a centralized team at the Ethereum Foundation. 
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Consequently, the WFE suggested regulating DeFi on the level of decentralized applications (DApps) rather than at the protocol level. 
Furthermore, the WFE commended the Financial Action Task Force (FATF) for its efforts to extend Know Your Customer (KYC) regulations, commonly referred to as the “travel rule,” to the crypto sector. 
It also endorsed the International Organization of Securities Commissions (IOSCO) Principles for Secondary and Other Markets, aiming to elevate standards in crypto markets. 
In summary, the WFE believes that CTPs have the potential to become significant contributors to the real economy and society. 
However, to realize this potential, adherence to regulatory principles is essential. 
The organization also underscores the need to balance innovation and regulation while acknowledging the interconnectedness of DeFi with centralized elements. 
Finally, the WFE supports the application of KYC regulations and the elevation of market standards in the crypto industry. 
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WFE Advocates Regulatory Framework for Crypto-Asset Trading Platforms to Boost Legitimacy

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