Recent reports have raised concerns about crypto trading platform Crypto.com’s involvement in intra-company trading activities. Because, allegedly, the company assigns its own teams to trade tokens for profit. Based in Singapore and ranked among the top 10 crypto trading markets, Crypto.com participates in proprietary trading and market making apps, according to sources familiar with the matter. Here are the latest allegations against the Bitcoin exchange…
Critical claims for Bitcoin exchange Crypto.com
Typically, separate private companies are responsible for market making and proprietary trading activities in most markets. Exchanges often match buyers with sellers at competitive and transparent prices. However, US regulators have begun to put pressure on exchanges that support internal market making activities. The US Securities and Exchange Commission (SEC) recently accused crypto exchange Binance of engaging in “manipulative trading that artificially inflates the trading volume of the platform” using a trading firm run by its CEO, Changpeng Zhao. “In traditional finance, we don’t see the New York Stock Exchange operating and making markets at the same time as a hedge fund,” said SEC Chairman Gary Gensler.
Crypto.com has not been widely associated with internal transactions since its inception in 2016. However, a source with direct knowledge stated that Crypto.com executives made “absolutely dramatic affidavits” to foreign trading houses and denied any interference in trade. Another source claimed that employees were instructed to deny the existence of an internal market-making operation.
Answering the questions of the Financial Times, Crypto.com clarified its position. The company stated that it has an internal market maker operating on its exchange, and this internal market maker is treated no differently than third-party market makers as both facilitate tight spreads and efficient markets on the platform. The company defended its application, stating that it was not controversial.
Is the main purpose of the stock market to make a profit?
Crypto.com explained that most of its earnings come from its app designed for individual traders. In this application, Crypto.com acts as a counterparty for transactions and operates under a broker model. The company also noted that its trading team ensures risk neutrality by maintaining positions across multiple venues, including the Crypto.com exchange. However, sources revealed that Crypto.com’s proprietary trading desk trades both on its own exchange and other venues. The market maker desk at Crypto.com aims to increase liquidity on the platform. One source emphasized that the primary goal of the dedicated trading team is to make a profit rather than facilitate an exchange.
Crypto.com responded to these allegations by emphasizing that all companies in the trading sector compare their volumes with their competitors. The company stated that its priority is to continuously improve order book liquidity and reduce spreads, resulting in a more efficient market for all participants. As regulators increasingly scrutinize the activities of crypto exchanges, the extent of their involvement in internal trading activities will likely be closely scrutinized, and transparency will be crucial to maintaining market integrity and investor confidence.
