According to the National Bureau of Economic Research (NBER), more than 70% of transactions on unregistered exchanges correspond to money laundering operations.
At least three out of four transactions made on unregulated exchanges could be fake. The assertion arises from a recently published study, whose title is “Crypto Wash Trading.”
Since the FTX collapse, centralized exchanges have been increasingly challenged in the cryptocurrency market. Thus, a study of economists further discredits them.
According to researchers from the National Bureau of Economic Research (NBER), more than 70% of transactions on unregistered exchanges correspond to commercial laundering activities.
Exchanges will have to do more to earn user trust in the cryptocurrency universe. For those who are not yet registered, the task promises to be even more difficult, based on the recent study by the National Bureau of Economic Research (NBER) on the crypto laundering trade.
In fact, according to the Center for Economic Research, most of the activity on unregistered exchanges is related to laundering business transactions.
Unregistered Exchanges Behind Illegal Market Transactions
NBER researchers used statistical techniques and behavioral finance to categorize transactions in the crypto market. When analyzing those carried out on unregistered exchanges, that is, platforms that do not have a license from the financial or stock market authorities, they found that more than 70% of the transaction volumes correspond to wash trading.
“We found out that the volume of commercial laundering transactions averages 77.5% of the total volume of transactions in unregulated markets, with a median of 79.1%,” NBER informed.
On who is likely to engage in the illegal practice, the researchers noted the following:
“Wash trading is most likely to be conducted using automated programs or bots, taking into account efficiency and the number of trade orders required. Strong evidence suggests that most laundering transactions are performed by bots, which can be easily added to the scripted business structure using simple Python programs.”
It should be noted that wash trading is defined as an illegal practice in which traders and brokers agree to manipulate prices in the markets, with the aim of making more profit. Within the study carried out by NBER, $4,500 billion in the spot markets, as well as more than $1,500 billion, are affected by wash trading.
For What Purposes?
According to the researchers, unregistered exchanges have short-term interests in wanting to do laundering. Specifically, these manipulation activities allow them to have a better classification in data aggregators such as Coinmarletcap or Coingecko.
Moreover, economists have noticed that when cryptocurrency brokers indulge in wash trading, it has a huge impact on the prices of the coins offered on their platform. The researchers allege that this high flow of irregular operations artificially inflates crypto prices within these platforms.
Following the FTX collapse, dozens of exchanges began giving proof of the funds they held as a way to restore confidence in the industry, and to their businesses in particular.
In any case, this report will give stock authorities one more argument to speed up regulation in the cryptocurrency market.
By Audy Castaneda
