A number of cryptocurrency exchanges and advocacy groups from different countries have come together to form a coalition aimed at fighting market manipulation.
A group of crypto companies such as Circle, Anchorage Digital, and Huobi Global formed a coalition to take action against market manipulation. With this, they seek to generate trust in the growing sector of digital assets.
The so-called Crypto Market Integrity Coalition, convened by Solidus Labs, a risk monitoring software company, urges crypto businesses – digital currency companies – to sign a “market integrity” pledge. It recognizes the potential for cryptocurrency fraud and the need for the industry to protect investors.
“It’s about recognizing that you need entities focused on a fair and orderly system that try to prevent the abuses that can happen if you don’t pay attention,” said Kathy Kraninger, vice president of regulatory affairs at Solidus Labs.
How the coalition of crypto companies will be able to stop possible fraud?
The new alliance and commitment come at a time when regulators are concerned about the safety of the new market for investors.
In fact, the potential for market manipulation is one of the main reasons for rejecting applications for spot bitcoin ETFs, according to the Securities and Exchange Commission.
Recently, the markets regulator vetoed a proposal by Fidelity’s Wise Origin Bitcoin Trust to offer an ETF (exchange-traded fund) that would track the cryptocurrency. This since it determined that the proposal did not comply with the rules designed to prevent fraudulent and manipulative practices.
In December 2021, the Bank for International Settlements called for more guidelines to prevent cryptocurrency fraud. Their argument was that anonymity coupled with limited enforcement of anti-money laundering rules exposes DeFi (decentralized finance) to illegal activities and market manipulation.
The CMIC pledge includes a commitment to “maintain fair and orderly digital asset markets and prevent market abuse.” The group said it planned to eventually share its own research on cryptocurrencies, as well as establish a dialogue with regulators and consider a shared surveillance and data-sharing framework.
“Harmonizing a broad global approach to digital assets and competition in the race for digital currency space can improve America’s competitiveness, security, and lower fundamental costs for basic financial access,” said the Circle’s chief strategy officer and head of global policy Dante Disparte. “CMIC’s commitment brings together the industry’s leading players to advance market integrity standards.”
This new commitment is an important recognition of the potential for fraud in the cryptocurrency space. However, it is still unclear how the decentralized finance sector can curb bad actors.
The group’s 17 founding members include US crypto advocacy group Digital Chamber of Commerce, UK-based self-regulatory trade association CryptoUK, and international think tank Global Digital Finance. Also joining the coalition are crypto data provider CryptoCompare, Anchorage Digital, the first crypto firm to receive a letter from the US national banking regulator, and Circle, the company behind the stablecoin, USDC.
Cryptocurrency companies and industry leaders have formed other groups aimed at addressing challenges in mass adoption and among regulators. In September 2020, Square – now Block – started a consortium aimed at pooling patents related to cryptocurrencies and Blockchain technology to “defend against patent abusers and trolls.” In February 2021, Chainlink, Aave, Messari, and others launched the GoodFi alliance to focus on furthering decentralized finance education and research.
By Audy Castaneda
