According to a Financial Times report on Monday, the Singapore-based crypto exchange, Crypto.com, operates proprietary trading and market-making teams. They are trading tokens for profit, creating a conflict of interest. Five unnamed individuals provided the information with direct knowledge of the company’s trading desk. However, Crypto.com told Decrypt that it would not rely on proprietary trading as a significant source of revenue.
When questioned by the Financial Times, the crypto exchange emphasized that having an internal market maker would not be controversial. In an email to Decrypt, Crypto.com clarified that while they engage in some market-making activity, such as having internal market makers for their CFTC-regulated product Up/Downs in the United States, this activity is regulated and follows a ruleset that ensures market fairness and integrity. The exchange emphasized the importance of a level playing field where all market makers must adhere to the same rules.
The FT report raises concerns about potential conflicts of interest within the cryptocurrency industry, particularly as U.S. regulators intensify their scrutiny of major exchanges like Binance and Coinbase. Both were recently sued by the U.S. Securities and Exchange Commission (SEC). In the complaint against Binance, the SEC alleged that the defendants had enriched themselves while putting investors’ assets at significant risk.
The report by the FT highlights the issue of conflicts of interest, which has caused regulatory and legal troubles for major crypto exchanges in the past. Sam Bankman-Fried‘s FTX went bankrupt last year, with prosecutors claiming that the exchange made risky bets using client funds. Binance has also faced allegations of commingling customer assets.
Earlier this month, Crypto.com decided to wind down its institutional service for U.S. clients, citing limited demand from institutions in the current market landscape.
