Singapore-based cryptocurrency exchange Crypto.com reportedly employs internal teams for market making and proprietary trading. A recent report by the Financial Times has raised concerns about potential conflicts of interest within the crypto industry based on the exchange’s policy.
The report comes as international regulatory standards become more stringent, and the U.S. securities authority is cracking down on leading exchanges.
Crypto.com Conflict of Interest Concerns
The paper points out that exchanges allow buyers and sellers to trade at fair, competitive pricing. At the same time, separate private businesses typically carry out proprietary trading and market-making. However, the participation of internal traders at the Crypto.com exchange could draw regulatory notice.
Similar practices at other digital asset exchanges are under increased scrutiny from US regulators. Binance is currently facing 13 charges from the US SEC. It includes accusations of manipulative trading by a trading firm run by its CEO.
Since the company’s founding in 2016, internal traders at Crypto.com have not been extensively publicized. Sources with knowledge of the situation claim that executives from Crypto.com gave sworn denials of their company’s involvement in trading. Employees, however, reportedly received instructions to claim that no internal market maker operation existed.
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In response to questions from the newspaper, Crypto.com claimed that their internal market maker uses the exchange like that of third-party market makers to promote effective markets with small spreads.
Industry Faces Regulatory Scrutiny
Conflict of interest concerns have been prevalent in the cryptocurrency industry. Critics were displeased by Binance’s purchase of a sizable share in Forbes, a renowned financial news source, for an estimated $200 million. Additionally, Coinbase was criticized for operating an investing division while making money on its exchange listing for the vertical. The securities regulator is probing both exchanges in its latest lawsuits.
Crypto.com, a prominent player in the industry, revealed that most of its revenue comes from its app for retail traders. The company operates under a broker model as the counterparty for transactions. The report also underlined that it safeguards its positions, including those on the Crypto.com exchange, by employing hedging strategies to maintain risk neutrality. In addition, the company emphasizes that its exchange provides a level playing field for institutional traders, fostering fair and equitable trading opportunities.
Through well-known sponsorships and sporting alliances, particularly commercials starring actor Matt Damon, Crypto.com has significantly increased its visibility.
Crypto.com recently joined the list of companies exiting the United States due to regulatory pressures. The exchange wound down its institutional service citing limited demand in the current market landscape.
Conversely, Crypto.com has been given a Major Payment Institution (MPI) license by Singapore’s regulatory body.
Meanwhile, the information about Crypto.com’s internal trading procedures has increased the emphasis on potential conflicts of interest and regulatory issues in the digital asset sector.
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