Reports of Controversial Trading Practices at Crypto.com Emerge, Exchange Responds

In the latest signs of a potential conflict, reports have emerged that crypto trading platform Crypto.com has deployed its internal teams to trade tokens for profits.

The Singapore-based exchange, also one of the top-10 crypto trading marketplaces, is operating proprietary trading as well as market-making teams, said five people familiar with the matter to Financial Times.

In most markets, separate private companies are behind market-making and prop trading activities. Also, the exchanges here match the buyers with the sellers at the most competitive and transparent price.

However, the US regulators have started clamping down on exchanges that support internal market-making activities. Earlier this month, the US Securities and Exchange Commission (SEC) charged crypto exchange Binance for using a trading firm operated by chief executive Changpeng Zhao and engaging in “manipulative trading that artificially inflated the platform’s trading volume”. 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.”

Ever since Crypto.com‘s launch in 2016, there hasn’t been much talk about internal trades at the exchange. However, one source with direct knowledge said that Crypto.com executives gave other, external trading houses “absolutely dramatic sworn statements that Crypto.com was in no way involved in trading”. Another source added that the exchange asked employees to “say there is no internal market maker type operation”.

Crypto.Com Issues Clarification

In response to the questions asked by Financial Times, Crypto.com said:

“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”.