How Can Crypto Exchanges Meet the Demands of Market Participants?

As cryptocurrency markets continue to grow in popularity among institutional and retail investors alike, it is crucial that they can meet the heightened demands of market participants with the proper technology, governance controls, and processes in place. In our experience, both as a market operator and as a mission-critical technology partner to 130+ market infrastructure organizations around the world, institutionalization is key to creating stability and longevity with investors. There are two areas that must be addressed for crypto exchanges to achieve institutionalization: having trusted, transparent and scalable market infrastructure and having market monitoring mechanisms to ensure that the exchange is operating with fairness and integrity.  

Trusted, Transparent and Scalable Market Infrastructure 

Crypto markets are almost always on, trading 24/7/365 days a year. Always-on market access combined with volatile market conditions can threaten an exchange’s core business if the technology is not designed and built to flexibly scale. Leveraging trading technology tailored for large order volumes with a redundant, scalable infrastructure is a must. 

Several crypto exchanges are using Nasdaq's technology to meet the needs of retail-oriented market participants and markets designed to cater for low-latency and high throughput institutional trading models, while benefiting from the flexibility to introduce new asset classes and market models as the market evolves. XP Inc. recently announced the creation of their crypto trading platform, XTAGE, citing that through their technology partnership with Nasdaq, XP will operate on innovative and robust capital market infrastructure, with the ability to seamlessly add new assets.  

In addition to our focus as technology partner, Nasdaq announced a new business that will power the digital asset ecosystem. The launch underpins our ambition to further advance and help facilitate broader institutional participation in digital assets by providing trusted and institutional-grade solutions, focused on enhanced custody, liquidity, and integrity. As more crypto exchanges choose to capitalize on the environment, partnering with an experienced technology provider with a crypto-forward strategy is crucial for success. 

Market Integrity 

While infrastructure is critical to building trusted and scalable markets, digital assets exchanges must also take into consideration external factors – one of those being regulation. As regulation evolves globally, crypto and digital assets continue to be a focal point for regulators and governing bodies.  

As regulators worldwide strengthen supervision in this area, crypto exchanges can implement tried-and-true practices from capital markets to ensure a fair and safe market for all participants. To help combat the rising threat of financial crime across the digital assets financial landscape, Nasdaq has expanded its anti-financial crime technology with capabilities and coverage for the cryptocurrency ecosystem. Through its Verafin and Surveillance products, Nasdaq has launched a comprehensive suite of crypto-specific detection capabilities to mitigate risks and provide monitoring of anti-money laundering, fraud detection, and market abuse across traditional and digital assets, fiat and crypto, and on-and off-chain activities. With the proper anti-financial crime technology in place, crypto markets can help provide safer trading venues for retail and institutional customers, encouraging greater participation.  

As the digital assets landscape continues to evolve and new regulation is introduced, exchanges will need to ensure they have the proper technology and processes in place to remain competitive, and a balance of agile infrastructure and appropriate monitoring protocols in place will be key to success. 

This post is commissioned by Nasdaq and does not serve as a testimonial or endorsement by The Block. This post is for informational purposes only and should not be relied upon as a basis for investment, tax, legal or other advice. You should conduct your own research and consult independent counsel and advisors on the matters discussed within this post. Past performance of any asset is not indicative of future results.