- Sethi outlines three phases of crypto trading, with the current era blending CEX liquidity and DEX composability.
- Future markets will prioritize shared liquidity over shared custody, improving trust and capital flow.
- CEXs move toward on-chain transparency and AI compliance, while DEXs enhance usability and innovation.
Kraken Co-CEO Arjun Sethi said that centralized and decentralized exchanges are growing toward convergence. In a PondTalk interview with Blew, he outlined three phases of crypto trading, highlighting the emerging hybrid era with shared liquidity, compliance bridges and on-chain identity. Sethi emphasized that exchanges are increasingly adopting each other’s strengths.
Three Phases of Crypto Trading Evolution
According to Sethi, the first phase, the custody era, was dominated by centralized exchanges providing deep liquidity, KYC and modes for users. The second phase focused on smart contracts, decentralized exchange composability, automated market makers and on-chain settlement. He said the current hybrid era integrates unified liquidity, compliance, identity solutions, and capital efficiency across both exchange types.
Sethi noted that DEXs will improve user experience, while CEXs will embrace on-chain transparency, proof of reserve, and AI-driven compliance. The synthesis, he explained, will create a self-regulating market system where capital and attention are routed efficiently.
Shared Liquidity Over Shared Custody
Sethi highlighted that future markets will emphasize shared liquidity rather than shared custody. He described exchanges as acting like a nervous system, directing capital and market confidence based on decisions made by both institutions and individual traders. This approach aims to combine credibility, uptime, and trust with decentralized innovation for professional and retail participants.
Convergence Through Innovation and Transparency
Kraken’s co-CEO said DEXs will continue fast-paced innovation in composability and user tools. Meanwhile, centralized exchanges are expected to integrate transparency measures, on-chain audits, and AI compliance.
According to Sethi, centralization and decentralization are no longer ideological but optimization functions. The convergence of both models points to a hybrid framework that balances efficiency, compliance, and open market execution.
This perspective from Sethi illustrates a shift in crypto trading architecture, moving toward interoperability, shared liquidity, and a market system where centralized and decentralized exchanges co-grow.
