Integrity of Digital Asset Markets
The interest of (retail) investors and financial institutions in digital assets such as cryptocurrencies, security tokens, utility tokens and non-fungible tokens (NFTs) has increased significantly in recent years. Digital assets (so-called "tokens") are traded via a variety of platforms ("digital asset markets"). Digital asset markets – analogous to traditional stock exchanges in the financial market – provide the infrastructure and the virtual trading place for trading digital assets. These largely new platforms are repeatedly shaken by allegations of market abuse and manipulation, which damage investor confidence.
For investors and financial institutions, this raises the important question of how to evaluate digital asset markets as part of their risk management and compliance requirements to decide on which platforms to trade digital assets. The integrity of the trading platform is a key decision criterion for investors and financial institutions. The evaluation of the integrity of a platform thus represents a central component within the framework of risk management and compliance requirements. However, the specific tools and assessment measures required for this purpose have been lacking to date, especially for digital asset markets.
This is where the research project comes in and aims to support investors and financial institutions in assessing the integrity of digital asset markets. Such an assessment not only allows investors and financial institutions to make informed decisions for proprietary trading, but also enables them to provide adequate advice to clients and the associated documentation, for example in the context of financial advice. The project's findings are also highly relevant for other stakeholders such as regulators or platform operators who have an interest in better designing digital asset markets to enhance market integrity.
The project is conducted together with the Chair of Financial Data Analytics at the University of Augsburg and funded by the Frankfurt Institute for Risk Management and Regulation (FIRM).
With the help of Goethe University’s eLearning fund and the “Innovation in der Hochschullehre" foundation, we are developing EduVest, a digital, browser-based self-learning tool that teaches about investment decisions in securities trading, depending on the user's prior knowledge. EduVest actively involves users in the decision-making processes of various financial market participants. The tool enables users who have no prior knowledge of financial markets to understand, for example, the purchase of a share. Advanced users, on the other hand, can obtain detailed information about the purchase of a derivative contract. In this way, different educational backgrounds are taken into account and the differences between users are actively addressed.