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

In accordance with insider sources cited by The Monetary Instances, Crypto.com, the Singapore-based cryptocurrency change platform, allegedly operates an in-house buying and selling and market-making workforce whose main goal is to generate income quite than facilitate buying and selling. 

Nevertheless, 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. Moreover, staff of the platform have been instructed to disavow any involvement in inner market-making operations.

Crypto.com promptly responded to the allegations, stating that they haven’t instructed their staff to supply false info to different market contributors. The platform acknowledges the presence of an inner market maker, which operates on the Crypto.com buying and selling platform. They declare that this inner market maker receives the identical therapy as third-party market makers, contributing to a platform characterised by slender spreads and environment friendly markets. The corporate 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 make sure danger neutrality, the Crypto.com buying and selling workforce hedges these positions by buying and selling throughout a number of platforms, together with their very own. They assert that each one contributors 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 revenue.

In gentle of latest allegations surrounding Crypto.com’s proprietary buying and selling practices, considerations have been raised relating to the potential misuse of person knowledge and the affect on market liquidity. Whereas hedged market making has been touted as a way to bolster liquidity, regulators sometimes view proprietary buying and selling with suspicion, citing the change’s entry to delicate person buying and selling knowledge as a big danger. Notably, on Could 23, the Securities and Futures Fee (SFC) of Hong Kong issued regulatory necessities for digital asset buying and selling platform operators, imposing a whole ban on proprietary buying and selling actions.

The SFC’s regulatory framework explicitly addresses the difficulty, stating, “With regard to proprietary buying and selling, we agree that liquidity on a buying and selling platform is necessary for shoppers. Therefore, the SFC permits market-making actions to be carried out by third-party market makers. Nevertheless, the present prohibition on proprietary buying and selling is all-encompassing and successfully prohibits even the group firms of a licensed digital asset buying and selling platform from holding any positions in digital property.”

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 change engages in such actions. Regulators argue that by getting access to buying and selling knowledge, change homeowners can exploit it to their benefit, resulting in unfair practices and potential market manipulation.

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