Crypto.com Denies Allegations of Misleading Trading Practices, Faces Regulatory Scrutiny Over Proprietary Trading Concerns

According to insider sources cited by The Financial Times, Crypto.com, the Singapore-based cryptocurrency alternate platform, allegedly operates an in-house buying and selling and market-making staff whose major goal is to generate income relatively than facilitate buying and selling. 

However, executives at Crypto.com have issued a solemn declaration to exterior buying and selling corporations, asserting that the corporate doesn’t interact in any buying and selling actions. Furthermore, workers of the platform have been instructed to disavow any involvement in inside market-making operations.

Crypto.com promptly responded to the allegations, stating that they haven’t instructed their workers to supply false data to different market members. The platform acknowledges the presence of an inside market maker, which operates on the Crypto.com buying and selling platform. They declare that this inside market maker receives the identical remedy as third-party market makers, contributing to a platform characterised by slender spreads and environment friendly markets. The firm emphasizes that almost all of its income comes from its retail buying and selling utility, the place Crypto.com acts because the counterparty to clients in a dealer mannequin. To guarantee threat neutrality, the Crypto.com buying and selling staff hedges these positions by buying and selling throughout a number of platforms, together with their very own. They assert that each one members on the platform, together with market makers, are handled equally, and the corporate doesn’t depend on proprietary buying and selling as a supply of earnings.

In mild of latest allegations surrounding Crypto.com’s proprietary buying and selling practices, considerations have been raised concerning the potential misuse of person knowledge and the affect on market liquidity. While hedged market making has been touted as a method to bolster liquidity, regulators sometimes view proprietary buying and selling with suspicion, citing the alternate’s entry to delicate person buying and selling knowledge as a big threat. Notably, on May 23, the Securities and Futures Commission (SFC) of Hong Kong issued regulatory necessities for digital asset buying and selling platform operators, imposing an entire ban on proprietary buying and selling actions.

The SFC’s regulatory framework explicitly addresses the problem, stating, “With regard to proprietary trading, we agree that liquidity on a trading platform is important for clients. Hence, the SFC allows market-making activities to be conducted by third-party market makers. However, the current prohibition on proprietary trading is all-encompassing and effectively prohibits even the group companies of a licensed virtual asset trading platform from holding any positions in virtual assets.”

The ban on proprietary buying and selling stems from considerations surrounding the potential conflicts of curiosity and abuse of person knowledge that may come up when an alternate engages in such actions. Regulators argue that by accessing buying and selling knowledge, alternate house owners can exploit it to their benefit, resulting in unfair practices and potential market manipulation.

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