Key Findings

Explore the key findings for the latest report, backed by thousands of hours of research.

- Key Highlights - Grade Statistics (Ranking Disparity, Volumes Distribution)

- Regulatory Compliance

- Volume Trends

- Market Integrity

- Liquidity & Execution

- Security and KYC Measures

- Custody and Assets

Key Findings - Centralised Exchanges

Explore the key findings and latest insights into Centralised Exchange performance from CCData's November 2024 Exchange Benchmark.

Coinbase Maintains Top Ranking

Coinbase has received the highest score in the November 2024 Exchange Benchmark, maintaining the top ranking for the third consecutive Exchange Benchmark. Coinbase scored full marks in Legal/Regulation, achieving the top ‘Licensing Score’ of all exchanges in the benchmark; which assesses the number of licenses held, as well as the quality of each individual license.

16 Spot Exchanges Reach Top-Tier Status, With 4 Achieving AA Grade

Out of 81 spot exchanges, 16 met the threshold for a BB+ rating (22%), down from 19 last Benchmark. 4 exchanges; Coinbase, Binance, Kraken and Bitstamp, have all achieved AA Grades, with Binance’s major negative event threshold having been removed since April’s Benchmark, taking them to second place.

14 Derivatives Exchanges Reach Top-Tier Status, With 4 AA Grades

Amongst the 34 exchanges which offer derivatives trading, 14 achieved Top-Tier status, with the top 4 exchanges achieving AA grades. Binance is the first derivatives exchanges to achieve a score about 90, driven by improved liquidity and volumes available on its perpetual instruments. This was aided by a growth in licensing and the removal of its major negative event threshold.

Key Findings (Continued) - Centralised Exchanges

Continued key findings of the latest Exchange Benchmark highlight overall Centralised Exchange performance across 8 key categories of evaluation, providing an assessment into the rankings and highlighting the vital distinction between Top-Tier and Lower-Tier.

Exchange Engagement in Due Diligence Process Grows

Exchanges have been diligently engaging with us throughout the Due Diligence process. Over 20% of all ranked exchanges have now submitted DDQs, with most of them ranking in the Top-Tier. This underscores deeper engagement on the part of exchanges, and contributes to higher transparency around business practices and key risk evaluations which is rightfully demanded by users of these exchanges.

VASPnet Data Shows 40 Out of 84 Exchanges Hold Both a VASP License and a Money Service Business License

VASPnet data shows that approximately 48% of assessed exchanges hold both a VASP and MSB License, whilst 31 hold at least one VASP or MSB License. Only 13 exchanges held neither, making up 15% of the Benchmark.

Growing licensing compliance is evident between Benchmark iterations and is vital as regulators adopt and enforce comprehensive digital asset policy.

No Major Negative Events in the Top-Tier

Major Negative Events, characterised by either a significant regulatory action by a stringent regulator as defined by us and VASPnet, or a major hack directly impacting user’s assets, have not played a role in this Exchange Benchmark’s Top-Tier.

In April, a number of Top-Tier exchanges were undergoing stringent regulatory action, or had experienced the loss of user funds. As our Negative Events penalty expires each Benchmark, none of these penalties were carried over, and no new Major Negative Events were applied.

Number of Top-Tier Reduced, Higher Disparity in the Ranking

As of October 2024, the number of AA-grade spot exchanges remains unchanged, however, the score required to achieve AA has increased by 5, underscoring continuous improvement amongst the top exchanges. The number of Top-Tier (AA-BB) exchanges has reduced from 19 to 16, without shifting boundaries. This is primarily driven by widening disparity on quantitative measures such as Market Quality. Grade B remains the most frequent grade awarded to exchanges, with 20 overall.

Top-Tier Exchanges Consistently Dominate Volume Distribution

Despite accounting for just ~20% (16 out of 81) spot exchanges, Top-Tier exchanges capture over 60% of current trading volume. Since April 2024, they’ve driven an average monthly volume of $850bn out of the total $1.4tn. This underscores the close relationship between volume and risk profiles; exchanges aiming to attract high trading volumes will likely need to adhere to high security standards, mitigating risks robustly across the board.

Key Highlights - Grade Statistics

VASPnet Identify the Top 5 Jurisdictions for VASP licenses

VASPnet data shows that the United States and Canada have issued the most licenses to Benchmarked exchanges, with 67 and 23 respectively. This includes both MSB and VASP licenses. Lithuania holds the most European licenses with 17, playing a key role in the upcoming MiCA regulation as an NCA with currently the widest coverage. In total, 481 regulatory licenses have been issued to 84 exchanges, whilst 54 exchanges have been specifically been prevented from operating under a jurisdiction.

Top Authorities Specifically Preventing VASP Operations

VASPnet data also shows the number of exchanges which have been specifically prevented from regulated activity within a jurisdiction. The Financial Intelligence Unit in India have prevented 19 individual exchanges from operating in India, followed by the Financial Services Commission in South Korea with 11. The FCA in the UK have also prevented 6 exchanges, including Indodax, Coinmate and Bithumb Korea.

Key Highlights - Regulatory Compliance

Top Volumes Positively Correlate with Top Scores

Our analysis shows a strong positive correlation between average monthly volumes and overall scores. This indicates that traders are drawn to venues with strong security measures, transparency, and market quality, providing the most optimal trading experience to attract large capital. Binance led with average monthly volumes of $472bn. Bybit generated the 2nd highest volume of $127bn. Coinbase, the highest ranked exchange came 5th in volume ranking with $66bn in volume.

Top Exchanges Make Up Over 50% Of 6-Month Spot Volumes

Within the Top 10 Spot exchanges by market share, 5 are currently part of the Top-Tier (BB+). Cumulatively, these 5 exchanges account for roughly 50.1% of all spot volumes during the 6-month Benchmark period. Binance dominates at 27.7%, but other large contributors include Bybit, Crypto.com, Coinbase and OKX. Key outliers exist, such as Bitrue and P2PB2B, representing 7.42% of 6-monthly volume market share, warranting further quantitative assessments around their volumes.

Key Highlights - Volume Trends

High Adoption of Third-Party TM/MS Services Within Top-Tier

All AA graded exchanges utilise external providers for both transaction monitoring (TM) and market surveillance (MS), whilst only 40% of A use both. As the grades progress, the proportion drops in a linear fashion, with only 25% of BB exchanges utilising both. Transaction Monitoring is concerned with detection of risky clients in relation to non-registration or anti-money laundering, whilst Market Surveillance is used to detect abnormal trading behaviour, with both aiming to uphold market integrity and mitigate risk of regulatory non-compliance.

Trade Size Distribution Can Identify Risk of Inflated Volume

Trade size distribution is a valuable metric for identifying wash trading activity on exchanges and is considered in our Benchmark assessment. Wash trading, where traders or entities trade with themselves to create misleading volume and liquidity figures, is a common issue in assessing the true market quality of exchanges. A good trade size distribution resembles a natural, semi-normal spread, with varied trade sizes indicating organic trading by independent traders. In contrast, a bad distribution shows sharp spikes or clusters at specific sizes, suggesting artificial trading.

Key Highlights - Market Integrity

Spread is Significantly Varied Across Benchmarked Exchanges

Spread is a critical factor in assessing market quality and ensuring fair trading conditions. Based on our granular order book data, among the analysed exchanges, we identified CEX.IO and HTX displaying the highest spreads on their BTC Spot pairs, with spreads averaging 0.047% and 0.018% respectively, during the period of analysis. Binance and OKX saw average spreads of 0.00002% and 0.00017%, respectively.

Binance Leads 5% Market Depth in BTC & ETH

Binance maintains the deepest order book across BTC and ETH instruments at the 5% level, with $350mn in depth between USDC and USDT pairs. Kraken and Bitfinex maintain similar depth, approximately $154mn, however their liquidity is concentrated on USD pairs, where they lead the market. CEX.IO and Coinbase maintain a balance between USD and USD-Stable pairs like USDC (both) and USDT (CEX.IO); but can’t compete on overall depth to Binance, Kraken or Bitfinex on a chosen pair with concentrated liquidity.

Key Highlights - Liquidity & Execution

KYC Requirements Show Little Industry Consensus

Across the 84 assessed exchanges, we observe a wide range of requirements at the top level for exchanges. Roughly 23% require Source of Funds; our most stringently assessed requirement. Proof of Address is required by 29% of exchanges, and over 50% of the Benchmark requires at least one of these stringent KYC checks. Conversely, 26% of exchanges do not require KYC at all for trading - a material vulnerability for exchanges, as well as a regulatory non-compliance across any AML directive.

CEX Hacks Since April Reach $162mn

Despite improving security standards, reflected in improved average security scores across Benchmarked exchanges, around $162mn has still been lost to hacks and exploits since April 2024. BingX and OKX were among the most notable cases, with BingX’s ~$50 million loss being the second largest in this period. In this case, a combination of hot wallets were compromised, reiterating the importance of multi-party computation technology and custodian services.

Key Highlights - Security and KYC Measures

Majority of the Benchmarked Exchanges Utilise Custodians

The majority of exchanges within the Benchmark (58%) have engaged the services of a third party custodian. Custodians are regulated and audited, as well as being operationally designed to protect digital assets and safeguard private keys. Custodians heavily reduce counterparty risk, and given $164mn in CEX hacks between April and October 2024, they play a vital role in mitigating these risks, as well as acting as a deterrent. The most popular custodians include BitGo, Copper, Zodia, Komainu and Coinbase.

Small Number Of Exchanges Offer Off-Exchange Execution (OTC or OES)

The Benchmark now incorporates native OTC services as part of our assessment regarding Off-Exchange Execution, given it allows for settlement to exist outside of exchange-managed wallets. The data shows only 24 exchanges currently offer either OTC or OES. Although these measures are less profitable for exchanges, or may seem nascent, their application does effectively mitigate exchange counterparty risk, and institutional allocators require these rails to commit large sums of capital.