19-2-2025 – The cryptocurrency sector has made significant strides since the catastrophic collapse of FTX in 2023, but industry leaders argue that more robust safeguards are essential to fortify the ecosystem, according to senior financial experts speaking at the “Views From Wall Street to Crypto” panel at Consensus Hong Kong.
Brevan Howard’s Chief Executive and Investment Officer, Gautam Sharma, acknowledged the technological advancement in trading infrastructure, particularly highlighting the shift towards exchange settlement where assets are held by custodians during exchange trading. However, he emphasised that further improvements are necessary.
“The evolution over the past 18 months has been remarkable, but we’re not quite there yet,” Sharma noted, advocating for comprehensive round-the-clock risk management protocols encompassing market, counterparty, and credit risks.
The issue of counterparty risk—where one party in a transaction might default on their obligations—remains particularly acute in cryptocurrency markets compared to traditional finance, owing to the absence of established intermediaries such as banks and clearing houses.
Fabio Frontini, who heads Abraxas Capital Management, underscored the paramount importance of counterparty risk management, especially in arbitrage trading. He advocated for rigorous stress testing, particularly in perpetual futures markets where margin losses can occur during forced liquidations—a scenario rarely seen in conventional markets.
“Proper stress testing can yield significant benefits when implemented thoroughly,” Frontini explained.
Flow Traders’ CEO Mike Kuehnel emphasised the critical need for transparent innovation to rebuild investor confidence. “Ensuring data accessibility and addressing liquidity fragmentation are crucial,” he stated, adding that “providing optimal pricing and consistent transaction capability are fundamental requirements.”
Market liquidity remains a significant concern for the industry, particularly following the twin collapse of FTX and Alameda Research. While major cryptocurrencies have seen improvements in order book depth, the dispersal of liquidity across various decentralised finance platforms and blockchain networks continues to pose challenges for market participants.
