A group of major cryptocurrency firms including Circle, Anchorage Digital and Huobi Global are forming a new coalition aimed at cracking down on market manipulation in an effort to instill trust in the burgeoning digital asset industry.
The Crypto Market Integrity Coalition, which was convened by risk-monitoring software company Solidus Labs, is also urging digital currency companies to sign a “market integrity” pledge that acknowledges the potential for fraud in the cryptocurrency space and the need for the industry to protect investors.
“It really is about recognizing that you need entities that are focused on a fair and orderly system here, and really trying to prevent the abuses that can happen if you’re not paying attention,” said Kathy Kraninger, vice-president of regulatory affairs at Solidus Labs and former director of the Consumer Financial Protection Bureau.
The new alliance and pledge comes as regulators remain concerned the new market is safe for investors, despite its surge in popularity. The Securities and Exchange Commission has cited the potential for market manipulation as one of the primary reasons for rejecting several applications for spot bitcoin exchange-traded funds.
Most recently, the markets regulator vetoed a proposal from Fidelity’s Wise Origin Bitcoin Trust to offer an ETF that would track the cryptocurrency, determining that it did not meet the standards designed to prevent fraudulent and manipulative practices.
In December, the Bank for International Settlements called for more regulatory safeguards to prevent crypto fraud, arguing that the limited application of anti-money laundering rules, along with transaction anonymity, exposes DeFi to illegal activities and market manipulation.
While this new pledge is a major acknowledgment of the potential for fraud within the crypto space, it remains unclear how exactly the decentralized finance industry can curb bad actors.
The other founding members of the coalition are CrossTower, BitMex, GSR, Bitstamp, Elwood, CryptoCompare, Securrency, MV Index Solutions, the Chamber of Digital Commerce, Global Digital Finance and CryptoUK.
The coalition should help to “harmonize financial integrity standards” across market participants as many await more regulatory clarity, said Dante Disparte, chief strategy officer and head of global policy at Circle.
“Integrity is paramount to the progress and ability of our industry to continue innovating and building an infrastructure that delivers on the promise of access to financial resources for all,” he said.
Although the group will initially be focused on recruiting additional firms to sign its pledge, CMIC eventually hopes to be able engage with regulators, promote training programs and endorse data-sharing frameworks that can help to address concerns about transparency in the cryptocurrency space.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.