What crypto can learn from traditional FX
Recent developments in crypto have hardened the view that convergence between digital and fiat currency trading structures is both inevitable and desirable.
It might be an exaggeration to suggest that cryptocurrency traders are going through an existential crisis, but there is no doubt that they have been shaken by the collapse of FTX and subsequent discussion of potential weaknesses in the structure of the crypto market.
One of the most lively debates has been on the extent to which elements of spot FX market infrastructure could be usefully replicated in this environment. There are already a number of similarities between the crypto and FX markets, such as the decentralized nature of trading.
With increased institutional adoption, it will be important for service providers to separate offerings such as liquidity provisioning, prime brokerage, lending-borrowing, custody and exchange services, says Ayal Jedeikin, CEO and founder of execution-only non-custodial trading platform Cypator.
It will be a natural transition for the institutional digital markets to move to an OTC-style of trading model, cleared either bilaterally or through a central clearer
“These need to be offered in a non-conflicting and independent fashion so it will be a natural transition for the institutional digital markets to move to an OTC-style of trading model, cleared either bilaterally or through a central clearer,” he adds.