The U.S. Securities and Exchange Commission (SEC) has said that it wants to see cryptocurrency markets, including exchanges, take steps to protect investors from manipulation if exchange-traded funds (ETF) are to be approved. One exchange is already working toward cleaning up the space and has introduced a tool that will allow it to monitor the platform for market manipulation and suspicious activity.
The Bitstamp exchange has announced that it will begin to use the Irisium Surveillance platform to uncover questionable market activity. The platform, which is already used by a number of financial entities including the Asia Pacific Exchange (APEX), is partly owned by Cinnober, a tech developer for financial markets with which Bitstamp recently partnered.
Bitstamp’s founder and CEO, Nejc Kodric, stated of the inclusion of Irisium, “We are committed to crypto in the long term. Our desire is to guarantee a fair and orderly market which reflects genuine supply and demand. Exploring new frontiers in preventing market manipulation is essential for the industry to mature.”
Irisium, according to the company’s website, has created a number of tools that allow entities to monitor trading platforms and ensure compliance with European regulations, including the Markets in Financial Instruments Directive, the Market Abuse Regulation and the Regulation on Wholesale Energy Market Integrity and Transparency. The site further asserts, “The system makes available the tools and analytical data to enable regulators to identify, track and investigate any trading activity” and “is already utilized by European regulators.”
Irisium’s CEO, Alastair Goodwin, explained of the new partnership with Bitstamp, “Bitstamp’s pro-active adoption of Irisium and close partnership with us demonstrates their desire to increase transparency, integrity and confidence in the cryptocurrency market. … Enhanced customer protection and market integrity will help drive adoption and market liquidity.”
Bitstamp’s decision to use the Irisium platform was completely independent of the SEC’s statement on market manipulation. However, the timing is perfect and could, if it works as planned, allow for crypto exchanges to jump one of the hurdles that have keep institutional investors at bay. Moves such as this, coupled with the announcements made by Fidelity and NASDAQ that they are almost ready to get their crypto platforms going, should help 2019 to be an important year for the crypto industry.
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The chairman of the U.S. Securities and Exchange Commission (SEC) said he would like to see the cryptocurrency markets adopting similar tools overseeing the trade of traditional instruments, before being “comfortable” with allowing exchange-traded funds (ETFs) based on cryptocurrency price movements.
CNBC reported that SEC Chairman Jay Clayton, speaking at the Consensus Invest Conference in Manhattan, pointed to several aspects of the cryptocurrency industry he wanted improved. Among these was a monitoring of prices to ensure the absence of manipulation, similar to surveillance mechanisms for stock exchanges.
“Those kinds of safeguards do not exist currently in all of the exchange venues where digital currencies trade,” he claimed.
Last April, Nasdaq announced that the Winklevoss-owned Gemini exchange would be using the stock exchange company’s SMARTS market surveillance technology for its BTC futures contracts traded on Cboe’s futures exchange. Even this did not prevent the SEC from denying Gemini’s application for an ETF based on BTC futures, last July.
Clayton also said that custody for cryptocurrencies has not been sufficiently developed, with numerous high-profile thefts reported often. “We’ve seen some thefts around digital assets that make you scratch your head… We care that the assets underlying that ETF have good custody, and that they’re not going to disappear,” he said.
Currently, several companies offer custody services, with regulatory approval, such as BitGo. However, Clayton maintained that services “need to be improved and hardened.”
During the conference, Clayton also affirmed the SEC’s position on initial coin offerings (ICOs), whose tokens the agency classifies as securities under its control. He addressed companies holding ICOs to “start with the assumption that you’re starting with a securities offering.”
The commission regularly publicizes its issuing of cease-and-desist orders to companies that fail to register with it. It has also recently positioned itself against developers of smart contracts, on the assumption that they are providing a trading facility.
The SEC has not decided on the ETF application of VanEck Solidx, which it had said it would do by September 30. It has likewise refrained from a final ruling on other applications.
The lone dissenter to the commission’s rejecting of Gemini’s application, Commissioner Hester Peirce, has remained outspoken on the need for the SEC to step aside and allow for the innovation of financial products, subject to the same regulations as other investments. At the Crypto Valley summit in Zug, Switzerland, she delivered a video speech stating that she was “working on convincing my colleagues” to favor an approach allowing well-informed investors to choose whether or not to buy a cryptocurrency-based product.
She also noted how the Commodity Futures Trading Commission has been open to cryptocurrency derivatives, and that the SEC itself was holding various events regarding digital asset technologies, which made her “hopeful.”
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