How Market Structure Changed After 2022

The sequence of failures in 2022 removed several large firms and changed how the market is organised. Some changes were temporary responses; six appear durable.

1. Reserve attestations became standard

Most large venues now publish evidence of assets held against customer balances, with the better implementations allowing individual customers to verify their own inclusion.

The limitation remains that assets without liabilities is half a balance sheet, and attestation quality varies enormously.

2. Unsecured institutional lending largely ended

The lending that failed was substantially unsecured, extended against reputation. What operates now is collateralised, either on-chain with automatic liquidation or bilaterally with independent custody of the collateral.

This is the single most substantive change.

3. Custody separated from trading

Institutional participants increasingly hold assets with independent custodians and trade against them, rather than holding assets at the venues where they trade.

This reduces the exposure that turned exchange failures into client losses, and concentrates a different risk in the custodians.

4. Regulatory frameworks arrived

Licensing regimes in major jurisdictions now impose capital requirements, segregation rules, disclosure obligations and supervision on venues serving retail customers.

The practical effect for customers is that some venues are supervised and some are not, and the distinction is checkable in a public register.

5. Retail behaviour shifted toward regulated products

A meaningful share of retail exposure moved from holding tokens at venues toward holding regulated products in brokerage accounts. That changes who holds the asset and how they behave.

6. Yield products became rarer and more disclosed

Products offering retail depositors a return on crypto balances attracted supervisory attention. The most aggressive offerings disappeared; those remaining disclose more about where the return comes from.

What did not change

Concentration. A small number of venues still account for most volume, and a small number of custodians hold most institutional assets.

The incentive structure. Venues still earn from volume, which still pushes toward more listings and more leverage.

Retail exposure to platform failure. Customers still leave balances at venues, in amounts larger than the working balance the structure warrants.

The durable lesson

The failures were not caused by exotic technology. They were caused by unsecured lending, maturity mismatch, concentration and opacity, all of which are conventional failures with long histories in other markets.

The defences are correspondingly conventional: segregation, collateral, disclosure and supervision. Where a venue provides all four, such as an exchange that publishes its fee schedule in full, the residual risk is the ordinary risk of using any financial firm. Where it provides none, the history of this sector describes what happens.