Intermediary Runs on the Blockchain

Abstract

When an intermediary gets into trouble, its customers withdraw. Whether the assets move to a competitor or leave the sector decides whether the shock is contained. Cryptocurrency exchanges are custodians, and the blockchain records whether each withdrawal goes to another exchange or leaves the sector. They hold two claims for their customers, Bitcoin and stablecoins. We estimate how customers respond to adverse events, and how the response differs between events that threaten custody and events that threaten trading. Both assets leave affected exchanges. The net outflow is larger when the event more directly threatens custody: 17% of the balance after an insolvency, 8% after a security incident, and 1% after a regulatory action. Most Bitcoin leaving an exchange goes to non-exchange entities. When the event threatens trading but not custody, only Bitcoin leaves. Exchanges not involved in the event lose assets only in an insolvency.

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Funding

Daniele Bianchi acknowledges financial support from the Fintech Chair, Université Paris-Dauphine – PSL, sponsored by Forvis Mazars and Crédit Agricole CIB.

Citation

Bianchi, Daniele, and Kirill Shakhnov. Intermediary Runs on the Blockchain. Working paper.

@article{bianchi2026intermediary,
  title={Intermediary Runs on the Blockchain},
  author={Bianchi, Daniele and Shakhnov, Kirill},
  journal={Available at SSRN 7662463},
  year={2026}
}