Conflict of Interest

A conflict of interest occurs when an individual or entity has competing professional or personal interests that could influence their judgment or actions. In financial derivatives, this might arise when a firm provides both brokerage services and proprietary trading, potentially leading them to prioritize their own profit over client execution.

In crypto, a protocol developer holding a large percentage of a governance token while voting on changes that increase that token's value is a classic example. Managing these conflicts requires transparent disclosure, robust governance structures, and strict operational silos.

If left unmanaged, these conflicts erode the trust necessary for sustainable market participation. Regulatory bodies mandate that firms implement internal controls to identify and resolve these conflicts proactively.