A Hybrid, Transparent Trust and Risk Assessment Framework for Cryptocurrency Exchanges

Abstract

Cryptocurrency exchanges act as critical intermediaries within the digital asset ecosystem, yet users currently rely on largely opaque, platform-defined trust scores to assess their reliability and risk. Existing industry frameworks, notably those produced by CoinGecko and CoinMarketCap, provide useful signals related to liquidity and volume integrity but suffer from limited transparency, fixed weighting schemes, and the absence of sentiment-based assessment. This paper presents HTREx (Hybrid Trust and Risk Evaluation framework for exchanges), a semi-automated, modular trust and risk assessment framework for cryptocurrency exchanges that addresses these limitations. The framework integrates five dimensions of exchange integrity: user sentiment, regulatory compliance, technical security, transparency, and incident history. Sentiment is quantified using transformer-based natural language processing applied to user-generated content from mobile application reviews and online forums. Compliance is assessed through structured extraction of regulatory and operational disclosures from Terms of Service documents using large language models. Security, transparency, and incident history are evaluated through a combination of publicly verifiable indicators, third-party assessments, and a recency-weighted incident scoring model. All components are normalised and aggregated into a composite score using user-adjustable weights, enabling personalised risk prioritisation while retaining a defensible default configuration for comparative analysis. The framework is demonstrated using four prominent exchanges—Kraken, Coinbase, Binance, and Uniswap—highlighting clear differences between centralised and decentralised platforms and illustrating how sentiment, compliance, and historical incidents materially influence overall trust assessments. The results suggest that transparent, extensible, and user-configurable scoring models can provide a more interpretable and context-sensitive evaluation of exchange risk than existing monolithic trust scores, with direct relevance for both retail and institutional participants.