A lot of the issues with current exchanges is a combination of scaling issues, scaling/trust, and regulation. I feel like conventional equities exchange would be able to deal with those issues quite easily
For starters, cryptocurrency exchanges need to know the crypto they trade with VERY well. It's an area where the law won't help you if you mess up. If someone steals a bunch of bitcoin from your exchange, a police report isn't going to get it back, it's gone for good.
Then add in that crypto exchanges are 24/7 (not just during business hours), and I'd argue that scaling them is much harder, nobody knows if cryptocurrencies will double (or more) in usage over the next few months, or if they will halve (or more) in that same time. A single runup could cause 10X the trading activity overnight.
I do think that we need more legal, regulated competition in this area, but I don't think for a second that the answer is Nasdaq trying to shoehorn cryptocurrencies into their current systems, they are just too different.
With good KYC regulation and enforcement many "hacks" can be mitigated. The Bitgrail hack, for example, was performed by customers taking advantage of shitty code. Presumably they know which accounts withdrew funds, but if they knew who the customers were that belonged to those accounts, they could go after them. This stuff is a big reason why I support exchanges being regulated as money transmitters.
Or even worse in some cases, someone that maliciously "burns" all of your bitcoin irrevocably destroying it forever by sending it to a bad address. Even if you catch the person that did it, that bitcoin is gone forever, and you can't just bring it back without concensus of the extreme majority of all miners and users (which isn't going to happen in bitcoin, it barely happened in Ethereum when it was much smaller with the DAO hack)
That's really nice because at least you don't have appreciable risk from the exchange itself when you use CFE from your usual broker.
The big players that you'd expect to move first in traditional financials would be the clearing houses, notable The Clearing House and Apex, with Apex, as the scrappy upstart, seeming to be the obvious candidate for offering vaulting/clearing facilities for cryptocurrencies. I'm surprised they haven't made a move into it, though I've heard rumbling that they've been dipping their toes into the space.
Because of this, a legitimate exchange would never really gain traction. Just look at Gemini.
Cryptocurrencies are far from unregulated[1].
[1]https://coincenter.org/entry/cryptocurrencies-are-far-from-u...
>Coinbase, Inc. is licensed by the Virginia State Corporation Commission as a money transmitter, but such license does not cover the transmission of virtual currency
On top of that, we're talking about the big players like Bitfinex, who created USDT simply so they didn't have to comply with any sort of banking laws, let alone securities trading regulations.
Even so, these so called regulations you point to don't exist on the biggest exchanges like Bitfinex, Binance, or even Poloniex. Poloniex pulled out of states once licenses started being required to deposit USD.
Manipulating customer margin calls becomes trivial if you can look at the books and calculate if buying/selling x amount of the order book will margin call y amount of funds and decide its worth it.