As per the latest report from The Financial Times, it is alleged that the crypto trading platform Crypto.com has internal teams to trade tokens and fetch profits. The report claimed that the exchange is conducting proprietary trading and market-making teams as well. The information was revealed by anonymous sources to the media outlet.
Many exchanges have been accused of having private companies behind market-making and prop trading activities. However, the SEC has tightened its grip on such platforms. Just last week, the authority filed a lawsuit against Binance for using a trading firm led by Changpeng Zhao to engage in manipulative trading.
FT: The crypto Exchange Cryptocom operates internal proprietary trading and market making teams to be the customers’ counterparty to improve order book liquidity for transactions and ran as a broker model.
Cryptocom executives gave other, external trading houses “absolutely in…
— Wu Blockchain (@WuBlockchain) June 19, 2023
The SEC Chair Gary Gensler said,
“These trading platforms, they call themselves exchanges, are commingling a number of functions. In traditional finance, we don’t see the New York Stock Exchange also operating a hedge fund, making markets.”
Crypto.com Comes Up with Clarifications
Since its launch, Cypto.com has not been associated with any claims of internal trades. But the informants stated that the exchange used to ask employees and external trading houses to say that there is no internal market-making operation going on within the exchange.
Crypto.com responded to the rumors and stated,
“We have an internal market maker that operates on the Crypto.com exchange and that internal market maker is treated exactly the same as third-party market makers that identically facilitate tight spreads and efficient markets on our platform. This is not a controversial practice”.
The platform also added that the internal team also trades on other exchanges at the same time. Their task is to ensure that the exchange’s risks remain as low as possible. Plus, they hedge positions on several other exchanges.
On the other hand, the sources said that the goal of Crypto.com’s internal trading team is to boost liquidity, and it only aims to make money but not facilitate any other exchange. The exchange claims that every company in the trading industry compares its volumes to its competitors, and the team is only there to improve order book liquidity and lower spreads. Through these methods, the company wished to achieve a more efficient market.
It is yet to be seen if this story has another twist to it, or if it has an impact on the performance of the exchange. However, it is still a setback for the platform, as it has caused some fear and uncertainty among the users of the exchange.