Evaluation of the Impact of Digital Assets on Financial Stability -Part 4

Most of the world’s cryptoasset trading platforms are not registered as regulated exchanges, and many have experienced server outages, or have been hacked to stop operations or limit the trading capabilities of buyers and sellers or cause large-scale theft of cryptoassets from customers and/or exchanges. Unlike traditional financial institutions or infrastructures, as cryptoasset trading platforms are usually unable or fail to register, their activities are not subject to any form of supervision in most jurisdictions.

At the end of 2017, the Bitcoin derivatives market established a market for central clearing, mortgage, and asset or cash settlement. Some people believe that these markets will raise the depth and liquidity of the Bitcoin spot market by increasing demand for Bitcoin and promoting short selling. Similarly, others believe that the derivatives market helps curb speculation by providing financial tools to short the market. However, the trading volume and open positions of the US Bitcoin futures exchange are still relatively small, and the exchange has strict restrictions on the position and considerable margin requirements for investors. Issues like insufficient liquidity, concentration of ownership, and fragmented market structure also make cryptoassets potentially vulnerable to price manipulation and other misconduct.