Major US stock exchange looks to enter cryptocurrencies anti-fraud sphere

Steve Miley

picture of american flagA stock exchange based in New York says it hopes that it can play a role in tackling cryptocurrency fraud using its market surveillance technology.

According to a recent paper from Nasdaq, the organisation can transplant the technology it uses to watch the currency and security markets into the crypto markets as well.

Globally, Nasdaq is the second-biggest stock exchange, and it claims that the list of potential fraud types it can combat using this method is extensive.

“Regulators, brokers and exchanges have surveillance teams that monitor activity constantly and advanced technologies to help capture and analyze abusive behaviors including pump-and-dump schemes, insider trading, wash trading as well as spoofing and layering”, it said in the research paper.

It intends to offer its services as a product to other crypto exchanges.

However, there are already indications from Nasdaq itself that locating the right sorts of firms to partner with could in itself be a problem. Ironically, the issue appears to be filtering out the crypto firms which are illicit and approving the ones which are above board.

Tony Sio, Head of Exchange and Regulator Surveillance at Nasdaq, gave some hints about the challenge. “We’re now getting approached every week or two”, he said.

“We won’t work with all of these firms though since a lot of them are quite early stage or not reputable yet”, he added.

This is far from Nasdaq’s first foray into the world of cryptocurrencies. The organisation is believed to want to be not just a stock exchange but a crypto buying and selling point as well.

“Nasdaq would consider becoming a crypto exchange over time. If we look at it and say ‘it’s time, people are ready for a more regulated market,’ for something that provides a fair experience for investors”, Nasdaq’s CEO Adena Friedman said earlier this year.

So far, several legitimate organisations in the crypto sphere have found themselves taking up Nasdaq on its offer.

One of the most high profile of these was Gemini, which is a crypto exchange set up by the Winklevoss twins.

When that partnership was launched, a spokesperson for Nasdaq indicated that the firm was very pleased with the arrangement.

It was “an important indicator of our commitment to expand the use of our market technology into non-traditional marketplaces, as well as new frontiers beyond the capital markets”, said Valerie Bannert-Thurner, Senior Vice President and Head of Risk and Surveillance Solutions at Nasdaq.

However, it is believed that overall take-up has been slow over time. Industry media outlet Bitcoin Exchange Guide is reporting that Nasdaq started receiving interest in its cryptocurrency offer two years ago, but that some interested parties actually held off getting involved until the end of 2018.

Nasdaq’s offer is clearly seen by some crypto businesses as an ideal solution to the problems of cryptocurrency fraud and the difficulties involved in watching the markets appropriately.

However, with claims going as far as saying that the technology could even “stamp out manipulation” in the markets, it remains to be seen whether it will live up to expectations.


Steve Miley

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