FTX collapse: A catalyst for evolving standards in crypto industry

CCData has recently announced the release of its much-anticipated Exchange Benchmark, a pivotal tool for evaluating the risks associated with digital asset exchanges. Since its inception in 2019, the benchmark has evolved to include dedicated methodologies, now covering over 150 spot, derivatives, and decentralized exchanges. The meticulous methodologies, encompassing over 200 qualitative and quantitative metrics, are a response to a landscape that witnessed dubious trading practices, particularly accentuated by the FTX collapse.

The demise of FTX, a poignant episode in the crypto realm, underscored the necessity for more stringent regulatory frameworks and reliable trading venues. The inadequacy of comprehensive and transparent methods in existing reports was glaring, a gap that CCData’s Exchange Benchmark aims to bridge. The robust methodology of the benchmark has not only brought forth a reliable evaluation of the trading landscape but has also gained the endorsement of esteemed institutions like VanEck, which has adopted CCData’s Exchange Benchmark methodology for its pending Bitcoin Trust ETF application, marking a significant endorsement of the benchmark’s industry relevance and reliability.

Key revelations from the October 2023 Benchmark

A year post-FTX, the discourse surrounding cryptocurrency and its regulatory direction continues to hold global attention. The October 2023 Exchange Benchmark mirrors this ongoing narrative, introducing new strategic alliances with Ciphertrace by Mastercard, GBBC Digital Finance (GDF), TokenInsight, and Hexagate. Furthermore, a newfound partnership with VASPnet aims to enhance the regulatory coverage of exchanges featured in the benchmark, a move reflective of the industry’s pursuit for regulatory adherence.

The recent release of the benchmark sheds light on the industry’s evolutionary path and the strides towards achieving higher operational standards amidst a challenging regulatory milieu.

Seven exchanges, including prominent entities like Coinbase, Bitstamp, and Kraken, achieved the apex grade, AA, a testament to the substantial advancements made by exchanges in the post-FTX epoch. Notably, Coinbase led the Centralised Exchange benchmark with a superior security rating, pushing Bitstamp to the second position. Among the 27 derivatives exchanges, eight clinched a Top-Tier (BB+) rating with OKX leading, and Bybit also securing an AA grade, showcasing a drive towards excellence and reliability.

On the decentralized exchange spectrum, Uniswap stood as the sole AA-ranked entity, its high security and liquidity scores being notable factors. The trend towards regulatory compliance was palpable, with 75 of 107 centralized exchanges now operating under regulatory licenses as indicated by VASPnet. A significant enhancement in KYC practices was observed, with Ciphertrace reporting an average KYC score of 3.2/4 for October 2023, up from 2.8/4 in April 2023.

Charles Hayter, CEO & Co-Founder of CCData, acknowledged the pivotal role of the FTX collapse in catalyzing a sector-wide introspection and subsequent elevation of operational standards. The latest Exchange Benchmark, he noted, encapsulates the hard-earned advancements of exchanges, underscored by the notable ranking uplift. Hayter’s optimistic outlook for continual improvements resonates with the industry’s renewed emphasis on security, regulatory, and compliance practices.

CCData’s bi-annual Exchange Benchmark update encapsulates the swift evolution of digital asset sector infrastructure and regulatory frameworks, driven in part by the lessons learned from the FTX collapse. The ratings derived from this report significantly contribute to CCData’s industry-standard CCCAGG Index and data solutions, ensuring a highly reliable and market representative price by utilizing data solely from ‘Top-Tier’ (BB and above) rated exchanges, thereby reinforcing its standing as an essential tool in the evolving digital asset industry.