Dispute Between CME, Crypto Exchanges Prompted CFTC Market Manipulation Probe

  • Dispute Between CME, Crypto Exchanges Prompted CFTC Market Manipulation Probe

Dispute Between CME, Crypto Exchanges Prompted CFTC Market Manipulation Probe

US government officials have ordered multiple cryptocurrency exchanges to fork over comprehensive trading data in order to aid in their investigation of whether or not cryptocurrency markets are being manipulated. In particular, as forklog.com writes, experts agree that the sharp "collapse" of the bitcoin rate is because after the futures for the leading cryptocurrency started, CFTC demanded from Coinbase, Kraken, Bitstamp, and itBit to provide data on trading.

The unnamed sources mentioned by the WSJ told the publication that the regulators had already opened the investigation after CME Group started trading Bitcoin futures a year ago in December. Several exchanges chose not to comply, claiming CME's request was invasive.

The CFTC was concerned CME did not have agreements requiring markets to share bitcoin futures trading data. The Journal added that the investigation was started after a quarrel between CME and exchange officials. All the four exchanges refused to provide data to this London-based company which is supposedly having its on cryptocurrency exchange. If there was such a clause, then all data pertaining to trading such as date and time of all trades, unfilled or cancelled orders, identities of traders, and size of orders would be available to CME on a then and there basis. The issue of the legal instrument to these exchanges makes it compulsory for them to respond with necessary data. The CFTC is working with the Justice Department, which the sources claimed is investigating the manipulation of other cryptocurrencies. "If there is any kind of attempted manipulation, whoever is doing it is taking a huge amount of risk for very little possible upside".

CFTC and CME's probe aims to identify price manipulation, if any, in the cryptocurrency market. As such, it acts as if it had the authority to look over potential fraud in the cryptocurrency's markets, even if exchanges trading it aren't subject to the regulations futures markets face. It's reported that manipulative trading in these exchanges could have affected the price of Bitcoin futures.

Jesse Powell, the chief executive officer of Kraken, has criticised the subpoena, stating that the "newly declared oversight" of the CFTC "has the spot exchanges questioning the value and cost of their index participation".

At the time, Attorney General, Eric T. Schneiderman had said, "With cryptocurrency on the rise, consumers in NY and across the country have a right to transparency and accountability when they invest their money". In one strategy, called "spoofing", traders make big orders to dupe others into raising their buy price, enabling the spoofer to sell at a higher price. The sources further stated that CFTC considered the Bitcoin futures a risky but worthwhile move.