Cryptocurrency markets grapple with insider trading

The nascent cryptocurrency industry is making headway with mainstream investors, but there are still big concerns over insider trading and other unethical behaviors.

Why it matters: Unlike the traditional investment markets, which are overseen by multiple government agencies, companies and funds dealing with digital tokens are largely left to self-regulate. This could leave retail investors unfairly disadvantaged without the same levels of information, and remain a hurdle to getting institutional investors comfortable with crypto-assets.

For digital token exchanges, like Coinbase and Robinhood, extra knowledge about individual tokens can have an out-sized effect on trading.

Flashback: For example, take Coinbase’s bumpy addition of Bitcoin Cash last fall.

  • Bitcoin Cash was created as a clone of Bitcoin, which meant that anyone who owned the cryptocurrency would automatically be entitled to the same number of Bitcoin Cash tokens.
  • Coinbase eventually announced it would roll out support for Bitcoin Cash a few months later to enable its customers to access their tokens via the company’s digital wallets.
  • But just hours before the listing was publicly announced, there was a spike in the price of Bitcoin Cash, suggesting someone with knowledge of the plans may have leaked or acted on it.
  • Coinbase hired two outside law firms to investigate the matter and recently told Fortune that it found no wrongdoing. However, a class action lawsuit against Coinbase over this is still ongoing.

Source: AXios

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