CFTC Investigates Four Crypto Exchanges in Trader Manipulation Probe
The Wall Street Journal has reported that the Commodity Futures Trading Commission (CFTC) is investigating four top crypto exchanges in part because they resisted sharing a trove of trading data with CME Group for its recently launched bitcoin futures. The probe is tasked with discerning if and where traders may be manipulating on these exchanges in order to affect futures prices — futures that are directly within the CFTC’s regulatory purview.
Also see: Is the SEC Crypto’s Wettest Blanket?
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CFTC Chairman J. Christopher Giancarlo may have forged himself as a darling of the cryptoverse for his agreeable comments toward the space in recent months, but he’s steering his agency regardless to do its due diligence where its oversight and cryptocurrencies collide. The latest on this front is WSJ‘s new revelation that the CFTC is probing four crypto exchanges for signs of traders conducting market manipulation.
Of course, the launch of the probe doesn’t necessarily indicate wrongdoing has taken place. Rather, the investigation partly arose after the CFTC grew irritated with the exchanges — specifically Kraken, Coinbase, Bitstamp, and itBit — after the exchanges disagreed earlier this year with the scope of requested trade data from CME Group, the launchers of an inaugural CFTC-approved bitcoin futures product in America. Each of these exchanges had respective data agreements with CME.
The derivatives powerhouse CME started offering bitcoin futures in the final days of 2017 and asked the four aforementioned exchanges to supply a trove of trading data after its beginning set of bitcoin futures contracts ran their course in January 2018. The exchanges did not fully comply, being “opposed to handing over so much sensitive trading data to [CME Group], which also operates a platform for trading cryptocurrencies,” WSJ‘s sources noted. Instead, the companies sent over smaller selections of data.
This snubbing led to the CFTC subpoenaing the four crypto markets, and the episode has played into the financial watchdog’s decision to launch a larger manipulation-focused probe. Whatever comes, the probe highlights how –for better or for worse — increased regulatory oversight is materializing in America’s nook of the cryptoverse.
Distinct, But in Same Ballpark as DOJ’s Recent Crypto Probe
The CFTC’s investigation marks the second high-profile crypto probe in recent weeks, coming on the heels of the U.S. Department of Justice’s May decision to unleash its prosecutors on rooting out potential manipulative trading practices like spoofing and wash trading in the cryptoeconomy.
Bloomberg says the DOJ is looking at traders manipulating the price of Bitcoin using sophisticated trading techniques. I wonder if prosecutors will limit themselves to that and ignore the pump and dump schemes that have been more brazen and egregious. https://t.co/Do1Cb5PlHg
— Nathaniel Popper (@nathanielpopper) May 24, 2018
CFTC officials were reported as helping the DOJ with that endeavor, and now they have their own full-fledged crypto investigation to organize. Both respective investigations will presumably take months to complete.
Virtual Currencies Not ‘Going Away,’ Says CFTC Commish
Even with all the regulatory hubbub, it seems as if America’s top financial officials are starting to awaken to the brave new world that cryptocurrencies may be beckoning.
The latest example comes from CFTC commissioner Rostin Benham, who, at the recent Blockchain For Impact Summit, said:
“Virtual currencies will become part of the economic practices of any country, anywhere. Let me repeat that: these currencies are not going away, and they will proliferate to every economy and every part of the planet.”
CFTC Corralling Crypto Derivatives
A May 2018 advisory statement published by the CFTC’s Division of Market Oversight (DMO) and Division of Clearing and Risk (DCR) departments consolidated the body’s expectations for “new virtual currency derivatives.”
Of the new guidance, the statement read:
“[…] it clarifies the Commission staff’s priorities and expectations in its review of new virtual currency derivatives to be listed on a designated contract market (‘DCM’) or swap execution facility (‘SEF’), or to be cleared by a derivatives clearing organization (‘DCO’).”
So, while the crypto-regulatory landscape in America has been lambasted for hitherto being inadequate, it’s derivatives field is maturing all the while.
What’s your take? What, if anything, do you think the CFTC will uncover in its latest probe? Let us know what you think in the comments below.
Images via Pensions & Investments, Reuters