Why Major Institutions Believe a "Good" Crypto Exchange is Designed to Fail

Financial institutions are increasingly aware that a "good" cryptocurrency exchange is fundamentally structured for potential failure. This perspective stems from the inherent conflicts in the traditional exchange model, where platforms often act as custodians, market makers, and lenders simultaneously. This concentration of roles creates systemic risks and conflicts of interest, as seen in past collapses. Institutional players now prioritize infrastructure with clear separation of duties, robust regulatory compliance, and transparent proof of reserves. The shift towards decentralized finance (DeFi) protocols and regulated institutional-grade custodians highlights this evolving risk assessment. For sustainable growth, the crypto market requires architectures that prioritize security and user asset protection over rapid, centralized expansion.