Implications of Governance Models and Regulatory Frameworks on Cryptocurrency Exchange Stability and Risk

Abstract

Cryptocurrency exchanges are central to the functioning and growth of digital asset markets as they facilitate billions in daily trading volume. Yet the regulatory frameworks and governance structures shaping these platforms vary widely and remain poorly documented. Existing methods often rely on volatile, surface-level metrics such as trading volume, which often overlook deeper legal and institutional drivers of exchange behavior, limiting the ability to assess compliance risk and systemic stability. This study addresses that gap by constructing a detailed dataset covering over 250 active and defunct cryptocurrency exchanges worldwide. Each exchange was profiled based on its trading volume, institutional structure, regulatory exposure, and operational characteristics including jurisdictional alignment, governance and ownership models, product architecture, and compliance history. Key findings of the analysis suggest structural features such as ambiguous governance and permissive regulatory environments are associated with more complex product offerings and elevated compliance risks. Preliminary analysis also indicated an independent relationship between trading volume and exchange risk. These patterns suggest that it is the interplay of limited oversight and weak institutional accountability that heightens the likelihood of regulatory breaches. By shifting focus from transactional indicators to institutional design and legal context, this research lays the foundation for more rigorous quantitative analysis of the relationship between cryptocurrency exchange characteristics and their operational performance.