Because digital asset exchanges perform both the traditional broker dealer function and the custody function, they face uncertainties and increased liability that traditional exchanges, which never touch custody, do not bear.
Source quote, verbatim
By having the crypto exchange perform the services of a traditional broker/dealer and custody holder, digital asset exchanges face uncertainties and increased liability that do not impact traditional exchanges.124
Wulf A. Kaal, Samuel Evans, Hayley Howe, Digital Asset Valuation (2022). SSRN: https://ssrn.com/abstract=4033886
Holds when
centralized digital asset exchanges holding customer assets
Classification
mechanismsupport: arguedfailure: combined custody and brokerage rolefamily: custody-and-key-lossdefilaw-and-legal-systems
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