Virtual asset trading platforms: An assessment of the stability risks and the potential for self-regulation

Abstract

In response to recent reports by influential financial regulatory bodies, this paper aims, firstly, to outline the financial, operational and systemic risks affecting the stability of virtual asset trading platforms (VATPs). It highlights risk management techniques that can be used to mitigate them. Some of these risks are applicable to trading platforms in general, and some are unique to Blockchain technology. Second, it makes the case for international self-regulation by VATPs and outlines the measures that platforms can adopt in order to build market stability and enhance client security. It argues that self-regulation can align platform and client interests, reduce systemic risk in the virtual assets market and act as a viable alternative to regulation from national or international bodies.