Crypto Has Evolved Since FTX, But Continuous Risk Management Is Crucial, Experts Say

HONG KONG – While the crypto industry has made significant strides since the collapse of Sam Bankman-Fried’s FTX in 2023, full risk mitigation remains an ongoing challenge, according to panelists at the “Views From Wall Street to Crypto” session at Consensus Hong Kong on Wednesday.

“Traditional financial firms are now playing a larger role in the crypto space, and we’ve seen major improvements in infrastructure, particularly with off-exchange settlement models that allow assets to remain with custodians while still being actively traded,” said Gautam Sharma, CEO and CIO of Brevan Howard Digital. “However, despite these advancements, the industry still has a long way to go in achieving full resilience.”

Sharma emphasized the critical need for round-the-clock risk management, including monitoring market risk, counterparty risk, and credit risk—all of which play a crucial role in ensuring stability.

Navigating Counterparty and Credit Risks in Crypto

Unlike traditional finance, crypto trading operates without centralized clearinghouses or banks to act as intermediaries. This leaves traders more exposed to counterparty risk, which arises when one party fails to fulfill its financial obligations.

“When we trade arbitrage strategies, counterparty risk is our number one priority,” said Fabio Frontini, founder of Abraxas Capital Management. “Additionally, credit risk plays a major role, especially in fast-moving markets.”

Frontini also stressed the importance of stress testing trading models, particularly in the perpetual futures market. “In crypto, liquidation events can be far more severe than in traditional markets,” he explained. “Proper stress testing can help traders prepare for extreme volatility.”

Market Liquidity and Institutional Participation

Institutional players require liquidity depth and price stability to confidently engage in digital asset markets. However, challenges remain, including the fragmentation of liquidity across various exchanges, DeFi platforms, and blockchains.

“To attract serious investors, we need more transparency and seamless liquidity movement,” said Mike Kuehnel, CEO of Flow Traders. “Better pricing mechanisms and efficient execution pathways are key to reducing market inefficiencies.”

Although liquidity has improved for major assets like Bitcoin and Ethereum, lingering concerns about decentralized market fragmentation could limit institutional growth.

“As crypto matures, ensuring 24/7 risk controls, better stress testing, and liquidity optimization will be critical for institutional adoption,” Kuehnel concluded.