The collapse of Luna underlines the role of the crypto exchanges as a gatekeeper

The $ 40 billion baking on the popular crypto token Luna last week underlines the crucial role that the stock exchanges as goalkeepers, which decide which digital assets are easily accessible to mainstream retailers.

The hard competition between the stock exchanges has led to a strong increase in the number of tokens that are available on platforms that are popular with investors.

But the risks of the listing of new tokens-and the lack of regulation of these assets-were emphasized last week when Terrausd, A Coin promised to achieve the value of the US dollar, became almost worthless and also deleted the value of his sister token Luna, which the research company CryptOmpare was “the greatest wealth in this period in a single project in the history of Crypto "referred to".

Your collapse has drawn attention to the standards, apply the stock exchanges when you decide, a coin. In contrast to the stock market, the supervisory authorities play little or no role in monitoring the output and trade of tokens in most jurisdiction.

"I think the entire industry has to create a high bar when it comes to assessing whether it lists stable coins or invests in stablecoins that are supported by things like algorithms," said Lennix Lai, director of financial markets at OKX, a crypto exchange.

Great exchanges, including Coinbase, Binance, Okx and Crypto.com, which made it possible for their customers to buy Terra or linked tokens beforehand, hired the trade during the crisis.

The first point of contact for many newcomers to crypto are mainstream exchanges such as Binance and Coinbase, who say that they are checking tokens before they are made available to their millions of users.

"It is true that we list more and more assets than ever before," said Paul Grewal, Chief Legal Officer from Coinbase, during an interview in April. "At the same time, there are many, much more assets available for examination and are submitted for examination than ever."

Grewal said that Coinbase rejected “much, much more assets”. In March it added 24 new assets to trade, from 160 that were requested for the exam, he said.

Overall, Coinbase listed 164 coins in April, compared to 28 in July 2020. The offshore exchanges FTX, Bitfinex and Binance lists more.

The enthusiasm of the dealers to access the latest popular tokens puts the stock exchanges under pressure to list more assets. The decisions of the stock exchanges also have a major impact on which tokens gain in importance. New listings on Coinbase often increase in price when more dealers have access to the tokens, a pattern that some analysts have referred to as a "coin base effect".

"Suddenly there is this massive liquidity inflow if you list a token on a stock exchange like Coinbase," said Roberto Talamas, a researcher at Messari, a company for cryptocurrency data.

ftx boss Sam Bankman-Fried said that only 50 cryptoma coins seem to have a real value. But most exchanges, including FTX, list several hundred assets.

Most jurisdiction have little or no legal standards for which crypto tokens can be listed publicly for trading with normal people, so stock exchanges play a key role in checking coins. "If you were in a regulated world, you would be held accountable for the products you put on your stock exchange," said a senior employee of a large European crypto group.

James Kaufmann, partner of the law firm Howard Kennedy, said that the regulation offers the stock exchanges a clear series of notification criteria that have to be enforced, while the cryptoma markets operate on the basis of the "buyer caution".

"The note is in the name, is it not true: Is it a crypto exchange or an stock exchange?" he said.

The CEO of Binance, Changpeng Zhao, said he would welcome it if the supervisory authorities would provide guidelines for token listings. So far, however, the world's largest stock exchange has rely on "Crowd Intelligence" to decide which coins should be listed, he said in an interview in March.

"Very often the amount is a better judge than ourselves," said Zhao, adding that A Coindie is the number of users the most important criterion for whether Binance lists it. In a blog post for his listing regime, Binance said that it will also be subjected to tokens of a "rigorous Due diligence test".

Gemini, the stock exchange in possession of the billion dollar Winklevoss twins, said they aim to list the digital assets required by customers, but also try to protect their customers from dangerous tokens.

"If we believe that our customer funds are seriously at risk, we would not continue," said Brian Kim Johnson, General Manager of the Crypto Core team at Gemini.

The examination of which standards use when you decide come a coin, since the strategy of adding more coins to promote growth shows signs of failure.

The purchase and sale of smaller tokens contributed to increasing the trading volume on Coinbase last year to increase seven times. However, the trading of what the "other crypto" stock exchange went back in the first quarter of more than half, compared to more than $ 370 billion in the last three months of last year, according to the Financial Times calculations. The category includes tokens other than Bitcoin and ether, which did not suffer any similarly large declines in the trade.

Brian Armstrong, CEO of Coinbase, said last month, the Plane platform was to create a system that users can use to evaluate and check new digital assets, similar to product reviews on Airbnb or Amazon. Coinbase believes that the system can "help to create additional consumer protection in crypto," he said.

Additional reporting by Scott Chipolina