When a number of major exchanges recently announced their decisions to delist Bitcoin SV, many questioned if exchanges have too much power.
After all, the decentralized nature of digital assets means they don’t rely on a central point of control and hence exchanges should not be the only one calling the shots. On the other hand, it is the responsibility of an exchange to protect investors, and their own reputations.
From a business point of view, the listing of any token is clearly a revenue driver, so any decision on delisting any asset has to be a considered and careful decision that needs to be transparent and accountable to users.
Indeed, on the journey for digital asset trading to become mainstream, all exchanges need to have a mechanism for delisting assets that is considered fair, equitable and not damaging to any stakeholders.
Exchanges delisting companies is not unusual in the traditional financial world
Many of the world’s major stock exchanges including New York, London and Tokyo have a mechanism in place to delist companies. The most common reasons for an exchange to delist a company is usually due to the failure of that company to meet the exchange’s minimum requirements for price, capitalization or liquidity. There are also more extreme cases linked to fraud or failure to file reports required by the exchange or regulators.
Similar to traditional exchanges, digital asset exchanges also need to have a mechanism in place to delist assets.
In the case of Bitcoin SV, the operator of one exchange listed the factors it considered before deciding to delist it including the level and quality of development activity, stability of the network / smart contract, and evidence of unethical/fraudulent conduct.
AAX’s mechanism for token delisting
AAX is committed to letting traders, regulators and the community understand the criteria we consider when making decisions to delist tokens. At the core of our commitment to providing a robust trading environment is conducting comprehensive due diligence on the quality and legitimacy of tokens before allowing them to come onto the trading platform, and then to subject them to continued monitoring.
Among the key metrics considered are transaction volumes and the number of holders of the token.
If the monthly transaction volume of a token falls below a percentage of the monthly total transaction volume of the entire digital asset market for an extended period of time, it will be put under consideration to be delisted.
As for tokens that are held by a small number of traders, AAX will consider delisting it if the number of users holding that coin in AAX exchange is less than a percentage of the total registered users.
AAX’s robust decision-making process to delist a token
The decision to delist a token is a collective decision made after thorough and comprehensive research by various departments of AAX.
For tokens with the transaction volume issue mentioned above or those that are held by a small number of traders, the AAX team will carry out an internal investigation on whether to delist it taking into account various points of view including security and technical.
If the team stands by the decision to delist a token after the investigation, a proposal will be submitted to the AAX Operation Committee for approval. After final approval, a timetable for delisting will be set up.
The delisting of a token is a serious matter that has to be handled with great care, and the AAX team goes the extra mile in researching and consulting with a variety of expert resources in order to come up with a decision that is in the best interest of the users.
To find out more about AAX or to pre-register please visit www.aax.com.