Crypto.com has come under scrutiny for its internal trading teams engaged in token trading activities. This development highlights potential conflicts of interest within the digital asset industry.
Sources familiar with the matter reveal that Crypto.com, based in Singapore and ranked among the top 10 global crypto exchanges, operates proprietary trading and market-making teams.
US regulators have recently intensified their crackdown on similar activities within digital asset exchanges. Binance, the world’s largest cryptocurrency exchange, has recently faced significant legal repercussions as the US Securities and Exchange Commission (SEC) filed 13 charges against its CEO, Changpeng Zhao.
The existence of internal trading teams at Crypto.com has remained relatively unknown since the company’s inception in 2016. Insiders reveal that Crypto.com executives provided sworn statements to external trading firms, vehemently denying the company’s involvement in trading activities. Employees were allegedly instructed to deny any internal market-making operations.
In response to inquiries from the Financial Times, Crypto.com denied allegations of instructing employees to deceive other market participants. The company clarified that it operates an internal market maker, treating it no differently from third-party market makers who facilitate tight spreads and efficient markets on their platform.
Crypto.com emphasized that this practice is not controversial and stated that the majority of its revenues originate from its retail trading app, where it acts as a counterparty for customer transactions, following a broker model.
Crypto.com further asserted that its exchange serves institutional traders and operates on a fair and level playing field for all participants. However, sources familiar with the company’s practices reveal that the proprietary trading desk conducts trades on both Crypto.com’s exchange and other venues, solely focused on generating profits rather than facilitating exchange activities. Additionally, the market-making desk at Crypto.com aims to enhance liquidity on the platform.
It remains to be seen how this scrutiny and potential conflicts of interest will impact Crypto.com and the broader digital asset industry, as regulators and market participants seek greater transparency and fair practices in the evolving crypto landscape.
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