Deng Jianpeng: The alienation of power of crypto asset trading platforms and their regulatory approach

The article was published in the 5th issue of "Thought Front" in 2024. The authors are Deng Jianpeng, professor and doctoral supervisor of the School of Law of Central University of Finance and Economics, and Li Chengyu, doctoral student of the School of Law of Central University of Finance and Economics

Abstract

Around the world, crypto asset trading platforms have mastered code technology and reached service agreements with platform users, thus gaining powerful powers to formulate trading rules, manage trading behaviors and resolve trading disputes, becoming an important supplement to public power supervision. However, the induction of the concept of profit supremacy and the lack of external constraint mechanisms have led to trading platforms paying more attention to the platform's own benefits when exercising power, and it is difficult to balance fairness and justice, which has caused huge economic losses to global investors and seriously threatened the security of the trading market. In order to correct the direction of power exercise and the trend of power alienation, it is necessary to clarify the public positioning of crypto asset trading platforms. On this basis, trading platforms are required to respond to the interests and wishes of the public, assume social responsibilities for protecting investors' rights and interests and safeguarding the public interest, reasonably formulate trading platform rules, faithfully and diligently carry out trading platform activities, and fairly handle user disputes. Through comprehensive public power supervision and industry self-discipline, trading platforms are urged to fulfill their responsibilities, thereby achieving the goal of regulating platform power.

Keywords:Crypto asset trading platform; platform power; social responsibility; investor rights protection; blockchain finance

I. Introduction

In recent years, crypto assets with blockchain as the underlying technology have increasingly attracted the attention and participation of many investors around the world. At present, these crypto assets include private cryptocurrencies (also known as "virtual currencies" or "private digital currencies") represented by Bitcoin (BTC), stablecoins represented by Tether (USDT), platform coins issued by crypto asset trading platforms represented by Binance Coin (BNB), non-fungible tokens (NFTs) represented by "Bored Ape" (BAYC), and tokenization of physical assets (RAW). In the crypto asset trading market, a few leading centralized platforms such as Coinbase and Binance are the main trading venues at present. Such trading platforms are established and centrally operated by private individuals. They establish trading order through platform rules and shape the behavior of traders. At the same time, they provide a variety of services such as order execution, payment and clearing, brokerage transactions, asset custody and even investment and financial management, integrating the roles of market regulators, service providers and participants.

The confusion of roles brought about by multiple functions enables the platform to master key influence and dominance, and ultimately have the "power" to control platform users and implement their own will. As a result, the platform has significant advantages in resource mobilization and risk control, and can more closely monitor market misconduct and market risks. However, the reality has ruthlessly shown that the platform not only cannot maintain the security and stability of the crypto asset market, but may also carry out activities that benefit itself at the expense of investors' private interests. Crypto asset trading platforms are gradually deviating from their roles as service providers and regulators. The platform power that should have played a positive role is even used as a tool for operators to seek private interests, seriously damaging the rights and interests of investors and the public interest. Therefore, the alienation and regulation of platform power has aroused the concern of the practical and academic circles. At present, many financially developed countries and regions are working hard to strengthen the supervision of trading platforms and continuously carry out law enforcement actions, hoping to completely eliminate platform risks through strict supervision or bans. These measures have constrained the improper behavior of trading platforms to a certain extent, but regulators have failed to fully configure the platform power constraint mechanism and have failed to comprehensively rectify the chaos of trading platforms.

Currently, a few researchers have pointed out that crypto asset trading platforms use their power to create favorable conditions for their own activities, which harms the interests of investors. International organizations and governments should formulate regulatory rules to prohibit platforms from entering into unfair trading agreements with users, and require platforms to fulfill obligations such as information disclosure and investor education. However, relevant research has not deeply explained what kind of power trading platforms have and what the specific problems of power alienation are, and the regulatory suggestions put forward are also somewhat broad and vague. In the discussion on "platform power", scholars have revealed the public nature or subject responsibility of network platforms in the fields of digital economy or e-commerce, based on the perspectives of e-commerce law and antitrust law, analyzed the platform power structure and potential alienation risks, and proposed that the government regulate platform power and ensure the legitimate exercise of power by platforms by setting competitive obligations and building a platform power relief system. Although the above results are quite inspiring, they have not given targeted suggestions based on the characteristics of crypto asset trading platforms, and cannot accurately resolve the main risks of their power operation.

Therefore, this article will analyze the connotation of the power of centralized crypto asset trading platforms and the alienation of platform power in combination with actual cases, and then explore more specific and effective ways to regulate platform power in a targeted manner.

II. The source and connotation of trading platform power

With the rapid development of blockchain finance around the world, the public has never stopped discussing the power of crypto asset trading platforms. Researchers have also repeatedly criticized the platforms for abusing their power and seeking personal gain. The call to end the power of centralized platforms is growing, which reminds us that we must make more detailed thinking on the source and basic form of platform power and other premise issues.

(I) The source of trading platform power

When analyzing the power of crypto asset trading platforms, the core is the cognition of power. In the study of legal philosophy and sociology, power refers to the subject's imposition of personal will on others based on a certain dominant force, such as the mastery of goods or marketable skills, and actually has an important social impact on the behavior of others. Experience shows that the continued operation of any power cannot rely solely on material, emotional or conceptual motivations, but must also have sufficient legitimate reasons for the survival of power and public acceptance. From this point of view, the power of the trading platform comes from a certain dominant advantage possessed by the platform, and it rises and develops based on the recognition of other subjects. First, the absolute control of the trading platform over the code technology gives it a dominant advantage, which is the main support for the formation of platform power. Technology has a strong social function and control power, and can give the subject professional power based on scientific knowledge. The Internet relies on a series of application protocols to operate, among which the code is the instruction for the computer to identify the content of the protocol and implement the operation, and is an important medium for realizing information transmission and behavioral interaction. Therefore, the design and application of code can have a restraining effect on the behavior of Internet entities. The code "promulgated" by programmers can even be regarded as the "law" regulating cyberspace. Therefore, control over code is power. The dominance of crypto asset trading platforms over users and the market is first realized through code technology. Like most traditional central entities, the operators of trading platforms do not use blockchain and consensus mechanisms to manage and verify data, but have exclusive access to and modify the code, shape the spatial architecture, operating mechanism and business model of the trading platform alone, dominate the trading model, control the access to crypto assets, and pass the platform's will to users through code, thereby determining whether users can or cannot trade, and becoming a dominant power holder.

Secondly, the trading platform and users reach a unified format of user agreement, and the platform has the power to unilaterally formulate and modify the agreement, which makes it enjoy the authoritative status of "manager", which is an important source for determining the legitimacy of the platform's regulatory power. Before crypto asset investors use the trading platform services, they must agree to the format contract prepared in advance by the trading platform, otherwise they can only stop using the platform. At the same time, the platform's user agreement not only determines the rights and obligations of both parties to the contract, but also clarifies the management authority of the platform operator, such as allowing the platform to modify, suspend, terminate any or all services at any time according to its own management needs, freeze user assets or close accounts, etc. The content of the service agreement and trading rules further shapes the trading order unilaterally dominated by the platform.

Finally, the trading platform can use the technical architecture to carry out more effective market management, making it a key force to fill the gap in public power supervision. For example, some studies have shown that when public power agencies face new problems, there will inevitably be "legislative gaps" or "enforcement blind spots", making it difficult to respond to market changes and risks in a timely manner. On the contrary, the trading platform can use the technical architecture to optimize the efficiency and speed of platform supervision, such as quickly prohibiting certain transactions, forcibly closing positions, and removing specific high-risk crypto assets, so as to reduce the impact of market risks on investors' rights and interests. This risk control advantage is more prominent in dealing with the globalization of blockchain finance. No matter where the user is, the trading platform only needs to enforce the platform rules to cross any jurisdictional boundaries, exert influence on global users, and replace public power to carry out more efficient and low-cost market management.

(II) Contents of trading platform power

1. Rule-making power

Rule-making power is the core of trading platform power and the main mechanism to reflect the will of platform operators. Its power covers not only the initial formulation of rules, but also the subsequent modification and termination of rules. From the perspective of the rule-making subject and procedure, the power subject is usually the platform service provider and platform operator, while other stakeholders such as platform users and merchants have almost no possibility of participating in and negotiating the formulation of rules. From the perspective of the form of platform rules, trading platforms often exercise power in the form of issuing service agreements, standards, notices, announcements and explanations of special terms, and the number of rules is large and the update frequency is high. Therefore, the specific content involved in the rule-making power is complex, mainly including: first, formulating behavioral rules to regulate the rights and obligations of crypto asset traders and issuers in the market entry, trading, and delisting links, such as user registration, crypto asset spot trading, leveraged contract trading, and investment and financial management rules; second, formulating punishment rules, the platform operator pre-sets a punishment mechanism for the behavior of all platform users, merchants, and crypto asset project parties, stipulating that when users deliberately default on transaction payments, harm the privacy and reputation of other users, and commit money laundering fraud and other illegal acts, they will be punished by freezing accounts, restricting transactions, and removing specific crypto assets; third, formulating dispute resolution rules to establish the dispute resolution method and applicable rules between the platform and users.

2. Trading behavior management rights

Crypto asset trading platforms exercise trading behavior management rights to ensure that platform rules are effective and implement the will of platform operators. The content of trading behavior management rights is rich, and the management objects cover ordinary trading users, merchants, crypto asset project parties and other groups of the platform, and its power subjects are also more diversified. The right to manage trading behavior is not only enjoyed by the platform operator. In order to achieve good platform governance, some trading platforms try to disperse and delegate some power to achieve complementary rights and interests among different stakeholders. For example, the "community voting" model is set up, that is, the exchange users are given the right to vote, and the voting results determine whether the encrypted assets can be listed on the platform. This behavior management right is a specific manifestation of the internal governance of the platform, which mainly involves two aspects: First, as a market regulator, the platform aims to regulate the trading order and control the financial market risks, focusing on rectifying the chaos of financial transactions and eliminating criminal risks, exercising the power of currency listing review, abnormal activity monitoring, forcing project parties to disclose information, anti-money laundering investigation, etc., and imposes severe economic penalties (such as freezing the encrypted assets of trading users) or expelling their user qualifications for users who violate platform rules and cause serious adverse consequences; second, as a trading service provider, the trading platform aims to meet user needs, expand the market scale and obtain more profits, focusing on promoting the transaction process and realizing the optimal allocation of resources, exercising the power of managing transaction orders, protecting user funds, executing user transaction instructions, etc., and taking management measures such as reputation warnings or restricting transactions for users who fail to fulfill their transaction obligations or affect transaction efficiency.

3. Dispute Resolution Rights

With the increasing popularity of crypto asset transactions, disputes between trading parties and trading users and platforms have increased. In order to efficiently and cost-effectively resolve disputes between platforms, users and merchants on the platforms, many platforms have played the role of "private judges" and resolved disputes and resolved user conflicts through internal dispute resolution mechanisms. The subject of the dispute resolution right is usually the platform. The content of the dispute resolution right can be subdivided into: dispute handling rights, appeal decision rights and execution rights according to different links. Most platforms not only handle disputes between users, but also use internal mechanisms to mediate disputes between platforms and users. They usually follow the procedures of filing an appeal, waiting for the progress of the appeal, ending the appeal or canceling the appeal, and executing the appeal decision to handle disputes. In addition, the trading platform has the right to judge the effectiveness of the evidence of both parties, determine the truth of the facts, and make effective appeal decisions according to the trading rules, and take measures such as restricting account functions, canceling orders, and returning assets to users.

3. Alienation of trading platform power

As mentioned above, user "authorization" and public power recognition (or acquiescence) are important conditions for ensuring the continued development of platform power. Both parties expect the platform to exercise power appropriately to establish a good trading order and promote the vigorous development of the industry. However, the operation of some platforms appears to be legal and compliant, but in fact it puts users and the market at risk, exacerbating the market liquidity crisis. The platform is deviating from the initial route and moving towards power alienation. It may be negligent in performing its duties and evading responsibilities in the process of deeply participating in crypto asset transactions, resulting in "power absence"; or it may be self-favoritism, abuse of power for personal gain, and "power abuse", which ultimately squeezes the rights and interests of investors and undermines the fair order of the market.

(I) Specific manifestations of the alienation of platform power

1. Abuse of rule-making power

The exercise of the power to make rules by trading platforms is not always "good governance". Its operators often use standard clauses as a form to unilaterally construct biased self-protection platform rules. First, in the rules of conduct, trading platforms will list the obligations of users in detail, but they will formulate many exemption clauses for themselves to exclude their own responsibilities as much as possible. Many of these clauses involve the private interests of platform users and may even shake the stability of the entire market order. Most platforms declare that they do not bear network security risks, use virus invasion and hacker attacks as exemptions, or write such technical problems into force majeure clauses to refuse to bear compensation liability. At present, governments of all countries emphasize that platform operators or owners have legal obligations to protect network security. For example, my country has formally established a network security level protection system in accordance with the principle of "whoever operates is responsible", which clearly requires network operators to protect the network from interference and destruction, and prevent network data from being leaked, stolen or tampered with. Therefore, when the occurrence of a cybersecurity incident is caused by hackers exploiting platform vulnerabilities or insufficient platform security, rather than being completely beyond the foreseeable scope of the platform's prevention, it is unfair to incorporate the platform's fault for failing to perform security obligations into the force majeure clause. Second, in the compensation rules, the distribution of compensation liability between the platform and the user is unbalanced, and the calculation standards of the compensation amount of both parties are not unified. When the platform's rights and interests are damaged, the platform usually requires users to calculate the amount of compensation based on the actual damage principle, but for the user's losses, most platforms clearly state in the agreement that their compensation liability is limited to service fees for several months (the service fee rate is usually lower than 0.1% of the contract subject), without considering the actual losses caused by the platform to the user. Third, in the dispute resolution rules, the platform imposes heavy and unfair obligations and burdens on users, which is not conducive to users' resort to judicial protection and lacks fairness. As the California court pointed out in the lawsuit, Coinbase's service agreement stipulates that platform users can only resort to arbitration or litigation if "contacting the platform" and "formal complaint" fail, and the above-mentioned numerous pre-litigation conditions are only for users, and the platform does not need to go through a long pre-litigation process to file an arbitration application.

2. Absence of the right to manage trading behavior

At present, some platforms lack the right to manage trading behavior. The trading platforms do not strictly perform their duties in accordance with the user agreement, and some malicious operators even use their power to gain private benefits. First, in the market supervision link, fraud and money laundering are two significant risks, but some platforms have not taken sufficient preventive measures, resulting in fraudsters and money laundering criminals entering the trading market. Specifically, few trading platforms elaborate on the specific requirements and review dimensions of their currency listing applications. Some platforms only require applicants to fill in basic information about encrypted assets without providing other materials such as risk assessment reports. At the same time, many trading platforms have not implemented strict anti-money laundering strategies, such as not forcing all customers to undergo comprehensive identity authentication, and not formulating a dynamic monitoring and regular reporting system for suspicious activities. Second, in the transaction service link, the platform provides users with fund custody services and holds the private keys of the custody wallet, but does not take necessary asset isolation and security measures, resulting in user funds being easily misappropriated by operators, causing a serious moral trust crisis and systemic risks. Taking the FTX platform incident as an example, malicious platform operators used the asset custody right to privately use user assets for personal high-value consumption and high-risk investment, which seriously reduced users' trust in the platform, and then triggered a liquidity run, causing FTX, which was once the world's second largest trading platform, to go bankrupt quickly, and caused a chain reaction in the global financial market.

3. Improper exercise of dispute resolution rights

The dispute resolution procedures within some platforms are simple and cannot respond to user complaints in a timely manner, and the legitimacy of the exercise of dispute resolution rights also needs to be considered. Specifically, most crypto asset trading platforms have not made unified regulations on specific complaint handling time limits, evidence identification standards, and handling of objections to complaint results, resulting in vague and confusing dispute resolution processes. In addition to the lack of necessary procedural rules, the platform's work efficiency in resolving disputes is low. Many platform users find it difficult to contact customer service personnel in a timely manner, and it is difficult to get effective help from the platform when encountering trading difficulties. In addition, sometimes the platform exercises its dispute resolution rights not to protect the rights and interests of investors, but to prevent users from seeking assistance from judicial authorities to avoid the platform itself from falling into litigation difficulties. For example, the platform sets internal complaints as a pre-procedure for arbitration or litigation, so it only needs to slow down the complaint handling speed to delay the progress of the process. Even if the user files an arbitration or lawsuit, the platform can raise objections on the grounds that the complaint process has not yet ended, which increases interference. At this point, the exercise of the right to dispute resolution has completely deviated from the track of fairness and justice.

(II) Reasons for the alienation of platform power

1. Internal motivation: the "self-interest" nature of the platform

The essence of the crypto asset trading platform is a private entity with profit as the core. It is distributed in different countries or regions. The trading services provided by a specific platform to users often span multiple jurisdictions. Faced with different legal systems or even regulatory gaps in different jurisdictions, the platform has room to evade supervision and arbitrage. The inherent profit-seeking nature of the platform makes it rarely take into account the negative externalities it brings to society, making it difficult to provide investors with a fair trading environment. Although many scholars and regulators point out that trading platforms are close to traditional financial infrastructure such as stock exchanges, settlement centers or payment systems in terms of concept and function, they are neither public authorities nor public administrative organizations authorized by law. In essence, they are still privately owned and operated commercial entities. Therefore, trading platforms are actually the same as ordinary civil and commercial entities, freely participating in market competition with the pursuit of their own interests as their core goal. Although the platform also plays the role of a regulator to maintain trading order during the operation process, this is mostly due to the platform's selfish motives, that is, proper operation can win a good reputation for the platform and bring more users and benefits. In addition, in the crypto asset trading market, platform abuse of power is a common practice, and those compliant trading platforms will first lose users and markets in unfair competition. Therefore, when exercising power, trading platforms are more concerned about how to increase profits, and only then may they consider whether their behavior is legitimate and fair.

2. External reasons: Insufficient supervision and self-discipline

The external constraints of trading platforms are relatively limited, which also leads to the alienation of platform power. On the one hand, there are gaps in public power supervision. Although central banks, regulators and international organizations are paying close attention to crypto asset trading platforms, most of them still lack good financial supervision and regulatory technology, and cannot completely solve problems such as the alienation of power of trading platforms. In legislation, some regulators directly include crypto asset trading platforms in the scope of the existing financial regulatory framework. However, many traditional regulatory rules cannot be fully applied to trading platforms, especially unable to cope with special risks such as high volatility of crypto asset transactions, and serious conflicts of interest caused by the mixing of multiple functions of trading platforms. In law enforcement, since crypto asset transactions can bypass traditional centralized payment and clearing systems, financial regulatory measures such as user identity identification and bank account fund tracking have become ineffective, resulting in regulatory blind spots. Although some regulators restrict or prohibit trading platforms from operating within their jurisdictions and impose administrative or criminal penalties on illegal acts of trading platforms. However, in the face of the globalization of trading platform services and the decentralized nature of crypto assets, unless the world reaches a consensus on ban-type regulation and jointly blocks trading platforms, it is almost impossible to achieve the expected regulatory goals. In the long run, extensive bans and strict restrictions may be ineffective. In the judicial system, many public authorities face obvious judicial obstacles when hearing related cases. Many cases show that since the registration place of the trading platform is usually a foreign country, the court where the plaintiff is located will encounter jurisdictional objections. Once there is a lack of strong evidence to prove the existence of a jurisdictional connection point, the judiciary will lose the legitimate power to hear platform disputes and will not be able to punish the improper behavior of the trading platform.

On the other hand, industry self-discipline is significantly insufficient. The above research shows that public power is particularly unable to regulate the power of crypto asset trading platforms, so it is crucial to develop industry self-discipline. In 2018, self-regulatory organizations such as the Virtual Commodity Association, the Japan Virtual and Crypto assets Exchange Association, and the UK CryptoUK were established, committed to establishing industry rules and cooperating with regulators to combat criminal behavior. But in fact, there are still few leading trading platforms that have truly joined industry associations, and the actual influence of various associations and organizations is insufficient, making it difficult to significantly improve the situation of platform abuse of power or lack of supervision. In addition, the work quality and efficiency of some self-regulatory organizations are low, and the organizational management is chaotic, resulting in the fact that the power of trading platforms has not yet been effectively constrained by the industry.

Fourth, the regulatory approach to trading platform power

In today's world, more and more trading platforms are accused of blindly pursuing profits without regard to the interests of investors, and even of fraud, conflicts of interest, lack of disclosure, and deliberate evasion of legal supervision. Facts have proved that under the influence of profit-driven and lack of supervision, the distortion and alienation of platform power are seriously affecting the rights and interests of global investors and the stability of financial markets, and people are increasingly concerned about how to regulate trading platforms. In this regard, some regulators believe that such platforms should be severely banned and their subject qualifications denied. But as mentioned above, a ban in a single country cannot completely eliminate the existence of trading platforms, and the rectification effect is limited. Furthermore, trading platforms have strong information and data technology control capabilities and strong control over various types of trading behaviors. In fact, they have become an important supplement to public power supervision. Therefore, it is unwise to completely deny the power of crypto asset trading platforms. Only by actively correcting the platform's behavior and transforming it from a risky thing to a controllable thing with governance value can we regulate the power of trading platforms in a rational direction.

Some studies believe that: "The exercise of power must always be subject to the constraints and restrictions of responsibility ethics and obligation norms. Only on this basis can a more rational view of power be born." However, trading platforms only act as pure commercial entities in private law, taking profit maximization as their main business responsibility, ignoring the negative impact of the alienation of platform power on investors' rights and interests and public interests. In the dilemma of insufficient public power supervision and industry self-discipline, this imbalance of power and responsibility has become increasingly prominent. Therefore, analyzing the platform's positioning, clarifying the content of the platform's responsibilities, and urging the platform to fulfill its responsibilities through external supervision should be the core idea of ​​platform power regulation.

(I) Starting point of regulation: analysis of platform positioning

Proper subject positioning is the basis for clarifying the content of subject responsibility. In this regard, although we do not deny the private subject nature of trading platforms from the perspective of organizational form and platform power source. However, regulators have long pointed out that some enterprises that can meet people's important needs and have the ability to exert control over the market should be regarded as public utilities. These enterprises provide pillar "infrastructure" for economic and social activities. They usually have scale effects within the industry. The goods or services they provide can help users start a wider range of downstream economic activities and put these users in a subordinate or disadvantaged position.

There are still debates and criticisms about the "public utility" theory in academia, but the theory has made a new positioning for modern enterprises, pointing out that the business behavior of some enterprises is closely related to the public interest of society. They are both market participants and important managers of market order. They have the characteristics of (quasi) public organizations and should not be simply regarded as "persons in private law." These key entities that provide "infrastructure" to the social economy are more unique than most private entities: first, public utility companies have begun to move from the private sector to the public sector, providing necessary basic services for issues of common concern to the public. Therefore, they are essentially not just a carrier for the realization of private interests, but an ecosystem that coexists with society and promotes market construction; second, unlike the equal view of subject rights and capabilities emphasized by civil law, there is an obvious capacity gap between users and such companies at the factual level. The latter are mostly in the center or dominant position of the industry and play the role of market regulators. Some studies even compare their compulsory power to state power, while users find it difficult to freely implement and realize their will in the contract signing and modification process, and can only "obey" the will of the company.

It can be seen that crypto asset trading platforms are common "public utilities" in the crypto market. Among them, the head trading platform is an important infrastructure of the crypto asset trading market. It imitates the traditional securities market, simplifies complex on-chain transactions, and provides users with intermediary, brokerage, custody and other services. It has a deep and broad global market foundation and is a carrier of market publicness. At the same time, with the support of cutting-edge technologies such as the Internet, big data, artificial intelligence and blockchain, the platform enjoys the corresponding right to formulate rules, manage behavior and resolve disputes, becoming the master of the platform field and assuming the public function of supervising the market. Therefore, when positioning the crypto asset trading platform, we should fully realize that it is not a simple commercial entity, but has become a public operator in the crypto asset trading market.

(II) Regulatory focus: clarifying the platform's responsibility

Some studies have pointed out that: "In the context of the justice value of law, the behavior of any subject must be evaluated by the justice value." The crypto asset trading platform is a private subject with public nature, carrying the trust and expectations of global users. The platform should follow the requirements of substantive justice and become a special subject that conforms to social values ​​and is more responsible. If the trading platform is only regarded as an "economic man" in the sense of private law-a self-interested limited rational commercial subject, it actually conceals the close connection between the platform and the market public, which will inevitably cause a serious imbalance in the balance of platform responsibility.

Focus on the primary reason for the alienation of platform power, that is, the platform is influenced by profit-seeking and focuses on short-term gains in the process of exercising power, directly or indirectly causing losses to user rights and interests, and impacting the security of the crypto asset trading market. At this time, requiring the platform to fulfill its obligations and assume responsibilities based only on the "user agreement" or infringement relationship is often unable to fully correct the adverse consequences brought about by the alienation of power, nor is it enough to implement the public responsibilities of the platform. Therefore, based on the theoretical basis of "stakeholders", a "social responsibility" with public value should be set for the crypto asset trading platform, so as to require the platform operators to effectively respond to the interests and wishes of the public. It is true that it is not realistic to blindly require the platform to meet all the demands of all stakeholders. Some studies have pointed out that mature "stakeholder theory" emphasizes that enterprises should focus on stakeholders who are closely related to them and have urgent needs. The platform users in a disadvantaged position and the entire crypto asset market are the main bearers of the negative externalities of platform power. Therefore, the content of the platform's responsibility should revolve around the two key dimensions of "protecting the rights and interests of platform users (especially disadvantaged crypto asset investors)" and "maintaining the public interest of the crypto asset market".

According to the above principles and logic, this article summarizes the rule-making power, behavior management power, dispute resolution power, and platform responsibility of crypto asset trading platforms as follows.

1. The responsibility of reasonably formulating platform rules

Format clauses are crucial to improving transaction efficiency and achieving inclusive finance. Trading platforms usually adopt the method of unilaterally drafting format clauses to establish platform rules. However, such standardized clauses formulated by one party and not negotiable increase the difficulty for platform users to understand the content of the contract and express their will freely, which can easily lead to an imbalance of interests between the platform and users. Therefore, in the process of drafting the content of the contract, trading platforms shall not formulate platform rules that are obviously unfair, deprive users of their rights or increase their responsibilities. Under the requirements of publicity and social responsibility, the platform should not only focus on and protect its own interests, but also take into account the demands of other stakeholders, reasonably allocate compensation liability, and set up investor rights protection and market supervision responsibilities. In the process of contract conclusion, trading platforms should fulfill their reminder and notification obligations. Among them, the reminder obligation requires the platform to actively remind users to check the platform service contract and rules in an important position or in an obvious way. In particular, it is not allowed to deliberately hide important terms and rules that may restrict user rights in a lengthy service contract. It should also use "bold" or "boldface" to enhance the reminder effect. The notification obligation requires the trading platform to inform the platform users of the contract content and changes truthfully and promptly. For non-professional investors who lack professional knowledge and judgment, the risks and trading content of crypto assets should be explained more fully.

2. The responsibility of faithfully and diligently carrying out platform activities

The crypto asset trading platform mainly plays the role of market regulator and trading service provider. Its diligence obligations have different focuses: First, as a market regulator, the trading platform should consciously assume the responsibility of maintaining the overall interests of the crypto asset market and ensuring the smooth operation of the trading order. Accordingly, the trading platform should strictly control the first pass of market access and implement strong supervision on market participants with a comprehensive currency listing review and information disclosure system, including the establishment of a neutral and professional currency listing review organization and the disclosure of currency listing review standards and results. Continuously disclose information that has a substantial impact on the market (including crypto asset white papers, project management conditions, personnel changes, etc.), improve the transparency of the trading market, and prevent fraud or insider trading. In addition, trading platforms also need to focus on dealing with market risks brought about by abnormal transactions and money laundering crimes, especially to step up the implementation of the platform's anti-money laundering work, formulate detailed anti-money laundering rules, strengthen the investigation of suspicious users, and submit work reports to public power regulatory agencies on a regular basis.

Secondly, as a trading service provider, the trading platform also provides a number of financial services that should be separated in the traditional market, including information coupling, transaction matching, fund clearing and custody, and brokerage intermediary business. This unprecedented functional mix has transformed the platform from an information intermediary to a credit intermediary, and the platform's responsibilities have also evolved in an advanced manner. In information coupling and transaction matching services, the crypto asset trading platform, as an auxiliary intermediary, has the core responsibility of providing users with appropriate trading services, including public trading information, docking trading needs, and assisting in fund transfers. However, in the custodial and brokerage services endorsed by credit, users entrust the platform with many matters such as fund custody and transaction execution based on trust, and the platform actually has the discretion to control and dispose of user funds. In order to prevent the platform from violating trust and abusing power for personal gain, it is necessary to require the platform to fulfill a higher degree of diligence obligations, protect the legitimate rights and interests of users, and ultimately maintain social trust. Therefore, trading platforms should take "asset isolation" measures, disclose financial statements or establish a reserve proof mechanism, prudently disclose the status of user funds and platform custody funds, and focus on preventing the risk of fund theft caused by external hacker attacks and building a defense system. In the brokerage business, as a trading broker trusted by users, the platform should assume the appropriateness obligations of understanding users, understanding products and prudently promoting. This includes assessing the investment and risk tolerance of different users, and taking targeted risk warnings and investor education measures. In addition, the platform should also complete the risk level classification of crypto assets and derivatives by itself or entrust a third-party institution, and shall not use false and misleading propaganda to induce users to invest. It should promote prudently based on the risk adaptation of users and crypto assets, and execute trading instructions with the goal of achieving the maximum benefit of users.

3. Responsibility for Fair Handling of User Disputes

The anonymity, transnationality and technicality of crypto asset transactions pose great challenges to traditional litigation or arbitration. Therefore, the rapid and fair handling of transaction disputes by the trading platform within the platform will become an important part of protecting the rights and interests of crypto asset investors and restoring market confidence.

Timeliness and fairness are the core requirements for resolving disputes, and are also the basic ideas for shaping the internal dispute resolution mechanism of crypto asset trading platforms. Under the requirement of timeliness, trading platforms need to build a strong and agile customer service center, establish a multi-channel complaint hotline, and improve the efficiency of accepting and resolving user complaints. At the same time, taking into account the cross-border characteristics of crypto asset transactions, the platform should create a multilingual and all-weather service model to meet the dispute resolution needs of global customers. Under the requirement of fairness, trading platforms need to strictly formulate dispute resolution procedures, correctly and fairly resolve conflicts between users and users, and between users and platforms according to trading rules, and actively disclose the arbitration process and results after obtaining the consent of the parties to the dispute. Of course, improving transparency is not a panacea to ensure the fairness of dispute resolution. In particular, in disputes between users and platforms, platforms are more likely to make judgments that are favorable to themselves, while ignoring the rights and interests of users or the public interest of the market. Based on this, platforms should moderately disperse the right to resolve disputes to other market participants, such as relying on smart contracts to create an "on-chain" jury, thereby building a dispute resolution mechanism with public supervision and joint decision-making.

(III) Regulatory path: implementation of platform responsibility

At present, the problems of poor management and reputation risks exposed by crypto asset trading platforms show that the motivation of trading platforms to carry out self-governance and fulfill their responsibilities is still insufficient. To ensure that crypto asset trading platforms become responsible operators, appropriate supervision and enforcement mechanisms should be deployed outside the platforms to guide and urge the platforms to assume responsibilities and make good use of their powers. Although the external constraints on crypto asset trading platforms have so far fallen far short of people's expectations, public power supervision and industry self-discipline are still the main forces for implementing platform responsibilities. As many studies have found, regulators in various countries can effectively eliminate platform risks in the short term through law enforcement investigations, huge fines, etc., and effectively require trading platforms to be responsible for investors and the public interest. When public authorities encounter jurisdictional obstacles or are unable to respond to industry changes in a timely manner, industry self-regulators can play a broader and longer-term supervisory role on trading platforms without being restricted by national borders and jurisdiction.

At present, public authorities should first focus on building a system of rights and responsibilities for crypto asset trading platforms, incorporate trading platforms into the existing regulatory framework, clarify the content of platform responsibilities, and provide strong guarantees for platform development with a sound legal system. For example, the European Commission has successively passed the Crypto Asset Market Regulation Act, the Digital Operational Resilience Act and the Sixth Anti-Money Laundering Directive, aiming to clarify the public obligations and responsibilities that trading platforms should fulfill from multiple perspectives such as financial transactions, cybersecurity, and anti-money laundering. In 2022, the Hong Kong Special Administrative Region of China issued the Policy Declaration on the Development of Virtual Assets in Hong Kong, formally establishing a new regulatory framework for crypto asset trading platforms and clarifying the suitability obligations and public responsibilities of trading platforms. Referring to the above ideas, in our current legislation, we can continuously strengthen the scientific understanding of the nature of crypto assets and trading platforms, re-examine the value of trading platform power and the necessity of supervision, and create a comprehensive trading platform power regulation system. However, it is not easy to move from a comprehensive ban to a prudent tolerance. Legislators can consider the "experimental legislation" model, through the introduction of temporary laws and regulations, or in a limited geographical scope to carry out legislative experiments on crypto asset trading platforms, and examine the market feedback after the legislative experiment, learn from the excellent regulatory experience of the Hong Kong Special Administrative Region and other countries, gradually adjust and optimize the current regulatory policies, and clarify the legal status and responsibilities of trading platforms.

Secondly, regulators should fully understand the limitations and shortcomings of traditional regulatory means, timely change the regulatory concept of crypto assets and trading platforms, and improve regulatory technology and regulatory capabilities. China's ban on crypto-asset trading is almost impossible to achieve, and it is difficult to protect investors' rights and interests and financial market security in the long term. Therefore, regulators may consider taking sustainable regulatory measures, such as establishing a registration and licensing system for crypto-asset exchanges, brokers and clearing houses, implementing unified supervision of platform businesses, guiding platforms to formulate reasonable trading rules and risk management plans within the scope of the license, strictly supervising the platform's business behavior, and requiring platforms to fulfill their social responsibilities and cooperate with the government to combat money laundering and other crimes. Finally, public authorities need to focus on responding to the cross-border law enforcement and jurisdiction challenges brought about by the global nature of crypto-asset trading. Regulators can use the principle of "active jurisdiction" to moderately expand the jurisdiction of law enforcement and judicial authorities over overseas platforms, and rely on international organizations such as the International Securities Regulatory Commission to reach regulatory cooperation with governments of various countries on crypto-asset trading platforms to achieve information sharing and cross-border law enforcement cooperation.

From the perspective of self-discipline in the crypto industry, practitioners and technology companies need to take advantage of the decentralization and tamper-proof advantages of blockchain to actively develop self-regulatory tools to help crypto-asset trading platforms become trusted entities and encourage the industry to better respond to the challenges of power alienation. In addition, influential industry associations can formulate sufficient and detailed industry standards for trading platforms based on investor rights protection and broader social welfare goals, and put forward more detailed operating requirements for trading platforms in terms of financial security, trading fairness and transparency, market integrity, risk management, anti-money laundering and combating terrorist crimes. Such soft-law industry standards are generated through brainstorming and joint consultation by market players. Compared with traditional laws and regulations, they are more professional and flexible, and at the same time help deepen the understanding of regulators and the public in various countries about crypto asset trading platforms and shape a unified cross-border regulatory consensus. However, industry standards are usually implemented by relying on the voluntary compliance of association members and lack mandatory enforcement power. Therefore, it is also necessary to establish a reputation-based platform evaluation mechanism. In the crypto market where market confidence and trading trust have been severely damaged, important information such as platform fund movements and trading data should be continuously disclosed to evaluate the credit of trading platforms, so as to encourage platforms to carry out compliant operations and practice social responsibility.

V. Conclusion

The development and growth of crypto asset trading platforms has opened a new era for the blockchain financial market, and has also brought unprecedented risks and impacts to crypto asset trading and investment. In essence, under the self-interested nature of trading platforms, the platform power that is integrated by code technology and digital contracts is very easy to be alienated and deviate from the trust of global users and social expectations. Therefore, from the perspective of stakeholders, the platform needs to assume the social responsibility of protecting the rights and interests of investors and maintaining the public welfare of the financial market. This is an important opportunity to inspire people to find ways to regulate power. Building a comprehensive social responsibility system around the right to make rules, the right to manage behavior and the right to resolve disputes will help limit the boundaries of the exercise of trading platform power and highlight the public value of trading platform power. But as one research institute said: "The self-regulatory ability of technology can never replace the constraints of institutional rules. The law is the foundation of order in the financial market." Therefore, the key to the implementation of the platform's social responsibility still lies in the supervision and supervision of external forces on the platform. Public power regulators should not regard power regulation as a total negation of the value of platform power, but should adopt more effective supervision strategies to form a new pattern of supervision. Industry self-regulators also need to play the flexible role of soft law governance, flexibly supplement the deficiencies of public power supervision, and jointly promote the trading platform to make good use of power and develop in compliance.

About the Author

Deng Jianpeng, Professor of the School of Law, Central University of Finance and Economics, Doctoral Supervisor, Member of the Academic Committee of the School of Law, Director of the Financial Technology Rule of Law Research Center of the School of Law, and Member of the Economic Special Committee of the 15th Central Committee of the Jiusan Society. His research expertise is in Chinese legal history, financial law (fintech, blockchain finance and law), artificial intelligence law and tax law. He has been invited to interview CCTV, New York Times and Financial Times many times. He has won the 13th Young Teacher Award of Higher Education Institutions of the Henry Fok Education Foundation.

Li Chengyu, PhD candidate of the School of Law, Central University of Finance and Economics.

(For ease of reading, references and notes are omitted, and pictures are from the Internet or provided by the author)