What Are Secondary Digital Asset Exchanges in the Crypto World?
Cryptocurrency secondary market trading is a rapidly evolving sector, as cryptocurrencies grow in popularity. The market cap for cryptocurrencies climbed from $1.5 billion in 2013 to over $3 trillion in November 2021. As a result, investors have shown tremendous interest in gaining exposure to these digital assets. Investing in these cryptocurrencies can give investors exposure to companies that are publicly traded, as well as the potential to gain exposure to individual digital coins or stablecoins.
While the Securities and Exchange Commission (SEC) has been focusing on the crypto secondary market, there are still questions about the legal framework governing this type of trade. In the short term, the SEC may need to offer guidance to the market. However, it is likely that a consistent regulatory framework for crypto assets will emerge. This may provide a pathway for regulation of the secondary market.
secondary.digital exchanges serve as custodians for traders’ deposited assets, maintaining records and matching buy and sell orders. These centralized exchanges operate more like conventional securities exchanges. Decentralized exchanges are, on the other hand, less like traditional securities exchanges, operating more like a B2C service in the blockchain world.
The rapid growth of these exchanges has been tempered by a variety of structural issues, including asset security, compliance, and relationships with regulators. Fortunately, these issues are also being addressed by the industry. Some platforms have adopted the attributes of centralized exchanges while others have taken on the characteristics of decentralized exchanges.
A growing number of institutions, from banks to brokerages, are adopting crypto. Combined with the improvements in ease of transacting and the 24/7/365 trading cycle, these trends have created highly liquid markets for digital assets. Although the number of financial institutions investing in crypto is only a fraction of the total, it is expected to increase dramatically in the future.
Crypto assets include both currencies and security tokens, as well as other nonfungible tokens. Currently, the secondary market is dominated by a handful of major crypto native marketplaces. It will be necessary to develop an infrastructure that supports global trading of these assets.
One of the most notable areas of development has been demand for regulated crypto investment products. As investors have expressed interest in acquiring exposure to individual public traded companies, they have opted to purchase governance tokens that represent the ownership of a company’s shares. These tokens also allow investors to participate in coin offerings.
As the demand for a regulated crypto product increases, the development of a reliable regulatory framework for digital assets will be essential. Developing definitions for crypto exchanges, and a rulebook for regulating secondary market trading of these assets, will help reduce the level of uncertainty in the marketplace. Those exchanges that follow the example of the SIX exchange may be able to capitalize on this opportunity, while those that fail to do so could be left behind.
Cryptocurrency is poised to transform the financial services industry. As the technology matures, there is the potential for tokenized versions of traditional assets to appear in a variety of sectors, from real estate to high-yield loans. Those assets will be a part of an open blockchain network that will change voting, record-keeping, tax accounting, and asset servicing.