The Commodities and Futures Trading Commission has subpoenaed four cryptocurrency exchanges in a probe of the market. There have been insinuations that the cryptocurrency market is being manipulated, reason for the CFTC move.
The basis for the listing of Bitcoin futures by CME Group were these four exchanges- Kraken, Coinbase, Bitstamp and ItBit. The listing was approved by CFTC and now these exchanges have been asked to submit their books for scrutiny. A report by the Wall Street Journal says that the regulatory agency is demanding a comprehensive data of trading activities from the exchanges, request which didn’t seem to go down well with the companies.
The CME had found it difficult to obtain these trading data from the exchanges, prompting the CFTC to wade into the matter in order to compel compliance from the exchanges. Initial CME requests were turned down by the exchanges calling it “intrusive”. According to a source knowledgeable on the matter, the exchanges later complied after CME limited their request to a certain time range of a few hours instead of all trading data.
The failure of the exchanges to furnish the CME with a comprehensive data was irksome to the CFTC, which moved to enforce full compliance from the exchanges.
The CFTC had last December, given CME the approval to list Bitcoin futures and would want the company to have access to all data necessary for it to function effectively.
A spokesperson for CME reported the matter saying “All participating exchanges are required to share information, including cooperation with inquiries and investigations,”
On May 24, the news broke that the US Justice Department was launching a probe into the activities of exchanges due to the suspicion that the market is being manipulated. Issues of concern were that there are exchanges and traders who are placing orders with the intention of spoofing the market.
Ordinarily, CFTC has no jurisdiction over Bitcoin spot market but is empowered by the law to move in if there is suspicion that the exchanges had broken the law. This is why the agency is working with the Justice Department to determine what goes on at the exchanges.
Spoofing and wash trading are old tactics employed by cheats in the financial market. John Griffin, a University of Texas finance professor is of the view that the absence of regulation makes Bitcoin a prime target for behind–the-scene influence. According to him, “There’s very little monitoring of manipulative trading, spoofing and wash trading,” Griffin said. “It would be easy to spoof this market.”
Obvious, with little regulation of the coin market, most analysts think that this is a very possible scenario.