Crypto Companies Band Together To Address Fraud Risk

Matthew Broersma,
london finance stock exchange gherkin © QQ7 Shutterstock city

Large crypto companies and trade associations promote ‘market integrity pledge’ to gain public trust amidst ongoing risk of manipulation and fraud

A group of large cryptocurrency companies including Anchorage Digital, Circle, Coinbase and Huobi Global have formed a coalition aimed at increasing transparency and cracking down on market manipulation in the largely unregulated digital asset industry.

The Crypto Market Integrity Coalition (CMIC), initiated by risk-monitoring software company Solidus Labs, is urging cryptocurrency organisations to sign up to a “market integrity” pledge to combat market abuse.

The aim is to promote confidence in the emerging asset class for the public and regulators, at a time when it remains controversial in many quarters, even as some mainstream financial organisations have begun adopting it.

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“Crypto is in a very different place than it was three or four years ago – there are crypto firms today with more robust and technologically advanced risk and compliance programmes than traditional institutions,” said Solidus Labs co-founder and chief executive Asaf Meir.

He said the aim of the coalition and its pledge is to convey this message to the public, while acknowledging the “current and future challenges” of risk and manipulation that the industry needs to address.

Dante Disparte, chief strategy officer and head of global policy at Circle, said the coalition “brings leading industry participants together to advance market integrity standards”.

The other founding members of the coalition are GSR, CrossTower, BitMex, Bitstamp, Securrency, Elwood Technologies, CryptoCompare, MV Index Solutions, Global Digital Finance, the Chamber of Digital Commerce, CryptoUK and Liberty City Ventures.

Crypto-assets have gained significant interest from mainstream companies over the past year, with Tesla in February 2021 notably announcing it had acquired some $1.5 billion (£1.1bn) in Bitcoin – a figure it said on Monday was worth $1.99bn by the end of the year.

The electric carmaker also briefly allowed vehicles to be purchased using Bitcoin, before shelving the plan over environmental concerns.

Ongoing risk

At the same time digital assets have remained highly volatile, while regulators have continued to emphasise their stability, fraud and manipulation risks.

The Securities and Exchange Commission has cited market manipulation as one of the main reasons for rejecting several applications for spot Bitcoin exchange-traded funds (ETFs), most recently vetoing an ETF proposal from Fidelity Wise Origin Bitcoin Trust.

In December the Bank for International Settlements called for more regulatory safeguards to prevent crypto fraud, saying anti-money laundering rules and the transaction anonymity built into digital currencies opens decentralised finance to illegal activities and market manipulation.

El Salvador last year made Bitcoin legal tender in the country, but the decision was criticised by the World Bank, ratings agency Fitch and most recently the International Monetary Fund, which cited financial integrity and stability issues, as well as risks to consumers.