Conference Agenda

The rapid expansion of cryptocurrency markets has positioned exchanges as core infrastructure in the digital asset ecosystem. Episodes of exchange collapse have exposed systemic vulnerabilities arising from weak governance, insufficient transparency, inadequate risk management, and cybersecurity weaknesses, prompting regulators to adopt more comprehensive oversight frameworks. This paper asks whether regulatory compliance can function as a coordination mechanism that aligns profit-seeking exchange behavior with long-term market stability. Focusing on the European Union’s Markets in Crypto-Assets (MiCA) framework, the study examines how exchanges may strategically respond to regulatory constraints and how alternative compliance outcomes could affect welfare. The methodological approach draws primarily from game theory, supplemented by institutional analysis from communications and financial regulation.

The paper develops a multiplayer game in which cryptocurrency exchanges choose among alternative compliance strategies within MiCA. These requirements include capital safeguards, governance standards, cybersecurity obligations, and disclosure rules, which are modeled as strategic policy choices rather than purely exogenous constraints. Exchanges select their policy set once and interact repeatedly over time, allowing reputation effects and longer-term incentives to influence strategic outcomes. Each policy is evaluated using a scoring framework that captures its expected impact on key dimensions of the cryptocurrency ecosystem. The evaluation considers four categories: market capitalization, investor trust, exchange security, and compliance costs. Scores indicate the relative magnitude of a policy’s anticipated influence on each dimension. The framework is informed by historical developments in cryptocurrency markets, including major security incidents such as the Mt. Gox Hack of 2014 and the Bybit Hack of 2025, which significantly affected investor confidence and market valuations. By incorporating lessons from past incidents alongside subsequent security improvements, the scoring approach provides a structured way to estimate the potential impact of regulatory policies under comparable market conditions.

We analyze the outcome of the game via computational simulations exploring potential equilibria, payoff structures, and aggregate welfare under different strategic configurations. The analysis suggests the possibility of two different equilibria. In the first, exchanges adopt the full set of MiCA requirements. In this configuration aggregate welfare appears comparatively higher due to increased market trust and reduced systemic risk. In the second equilibrium, exchanges converge on cost-minimizing partial compliance. Although this strategy is also individually rational, it generates lower collective payoffs due to diminished investor confidence and heightened instability, illustrating a potential coordination problem. We further evaluate the efficiency of the resulting equilibria by computing the Price of Anarchy, defined as the ratio between the worst equilibrium outcome and the social optimum, and the Price of Stability, defined as the ratio between the best equilibrium outcome and the social optimum. In our model, the Price of Stability equals one, indicating that the socially optimal outcome can be sustained as an equilibrium.

These findings suggest that regulatory design has a profound effect on strategic incentives of exchanges. Rather than functioning solely as an external constraint, compliance requirements may help facilitate coordination around higher-trust market outcomes. This perspective contributes to ongoing debates in communications and digital market policy by proposing a formal framework linking regulatory architecture to strategic behavior in crypto-asset markets. For policymakers, the analysis highlights the potential importance of minimizing regulatory arbitrage and ensuring consistent enforcement. For exchanges, the model suggests that long-term profitability may depend partly on coordinated adherence to credible regulatory standards.