CCData's Exchange Benchmark November 2023

CCData is proud to announce the release of its latest Exchange Benchmark, the industry standard for assessing the risk associated with digital asset exchanges. The latest report features expanded methodologies to evaluate all major digital asset trading venues, covering over 150 spot, derivatives and decentralised exchanges.

• Seven exchanges, including Coinbase, Bitstamp and Kraken, achieved the highest attainable grade in the benchmark, AA. This highlights the progress made by exchanges a year on from FTX.

• Coinbase secured the highest score in the Centralised Exchange benchmark, with a leading security rating, displacing Bitstamp, which now ranks second.

   

• 8 of 27 derivatives exchanges attained a Top-Tier (BB+) rating. OKX was the highest-ranked derivatives exchange, with Bybit also receiving an AA grade.

   

• Uniswap was the only AA-ranked decentralised exchange, in part due to its high security and liquidity scores. Curve, dYdX and GMX followed Uniswap.

Exchange Standards Have Elevated Since The Collapse of FTX

Centralised exchanges have seen improved grades since the last iteration, with high scores seen throughout the Exchange Benchmark for several exchanges. 7 centralised exchanges have now achieved AA status, held only by Bitstamp in the previous iteration, showcasing how exchanges are implementing positive changes to minimise counterparty risk for investors since the collapse of FTX.

Centralised Exchange KYC & Security Standards On The Rise

The average KYC score for October 2023, as per Ciphertrace, was 3.2/4 compared to 2.8/4 and 2.4/4 in April 2023 and October 2022, respectively. Leading exchanges, in particular, have implemented more robust measures.

The increasing adoption of custody services also signals an increase in exchange security standards, with the number of exchanges relying on custodians increasing from 32% in April 2023 to 44% in October 2023.

VASPnet Shows 75 Out of 107 Exchanges Are Regulated

According to VASPNet, around 75 out of 107 exchanges hold at least one license to operate as a VASP or Money Service Business, highlighting a sector trend towards compliance.

Furthermore, VASPnet data showed that 79% of exchanges that hold a money transmitter license in the US are also regulated in at least one other country. However, only 4 of these exchanges are regulated by the SEC.

Exchange Hacks Remain Concern Despite Improving Standards

Following a series of high-profile hacks in 2022, concerns around the security of centralised exchanges remain, as bad actors continue to exploit poor security practices. In 2023, centralised exchange hacks resulted in the loss of around $117 million in user funds.

Furthermore, we also found that security vulnerabilities remain prevalent in DEXs, with 44% of DEXs having been hacked previously. Of these, 8 DEXs have been exploited in the last 12 months. 17 of the 22 DEXs that were hacked lost more than $1,000,000.

Furthermore, we also found that security vulnerabilities remain prevalent in DEXs, with 44% of DEXs having been hacked previously. Of these, 8 DEXs have been exploited in the last 12 months. 17 of the 22 DEXs that were hacked lost more than $1,000,000.