A leading cryptocurrency exchange, Binance, may have engaged in wash trading when it opened its U.S. exchange in 2019, according to a Wall Street Journal article.
Binance Faces Wash Trading Charges
Accusing Binance and its CEO Changpeng Zhao of misrepresenting trading volumes on its U.S. exchange, the Securities and Exchange Commission (SEC) launched a lawsuit against the business. The SEC claims that Zhao’s Swiss trading business, Sigma Chain, was linked to several user identities used by Binance.US to exaggerate volume. The Justice Department is also looking investigating Binance and its U.S. subsidiary, despite the fact that Binance disputes the accusations and maintains that the SEC’s charges are without merit.
Wash Trading Rates Are Increasing
The severity of wash trading in the cryptocurrency market is highlighted by a new study that was published in the journal Management Science. According to the study, these tactics were responsible for almost 70% of the trade activity on cryptocurrency exchanges in the second half of 2019. Based on the analysis, wash trading may have generated a phony volume in the first quarter of 2020 of more than $6 trillion.
Further highlighting the need for additional regulation in the cryptocurrency business is the fact that centralized exchanges lack direct regulatory oversight, making it simpler for questionable operations like wash trading to take place.
The exchange does, according to a representative for Binance, maintain a dedicated market surveillance team to stop such operations. According to US officials quoted by the SEC, the site was at first aware of the danger of encouraging wash trading.
Other external variables have also had an impact on the cryptocurrency market in addition to the Binance situation. Following the publication of the WSJ’s article on the purported wash trading activity, the price of Bitcoin, the most popular cryptocurrency, fell by 2.65% to almost $29,000. Concerns were also heightened when China’s Politburo predicted a difficult economic recovery without unveiling significant stimulus measures, which affected market investor confidence.
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