The US Commodity Futures Trading Commission (CFTC) has demanded that several cryptocurrency exchanges — Bitstamp, Coinbase, itBit, and Kraken — share data about trading activity to determine whether any manipulation is affecting the crypto market, according to The Wall Street Journal.
While the CFTC investigation is still in early stages, it shows that regulators are taking a serious interest in bringing crypto exchanges under their oversight. In particular, the CFTC is looking into whether the market is being impacted by trading schemes like spoofing, or when traders enter large orders to artificially increase prices.
The CFTC investigation was sparked by a dispute over CME Group’s request for similar information. CME introduced Bitcoin futures, which allow users to bet on the future price of the asset, in December 2017. As the futures are based on the average of the price of Bitcoin at the four exchanges, CME asked them to share trading data in January when its first contract was ready to be settled.
The exchanges argued that it would be too intrusive to comply with this request, and ended up providing the CME with data only for a couple of hours and a few market participants. The CFTC, which regulates CME, is not happy with this arrangement, and has thus decided to take matters into its own hands to get more insight into the trades happening on those exchanges, which affect many people investing in the currencies, as well as the futures linked to them.
This move could bring greater legitimacy to the crypto space as a whole. The CFTC asking for this data will likely yield better results than a company like CME asking for it, as exchanges need to comply with demands from regulators to be able to continue to operate.
This is good news for CME and others that offer cryptocurrency-related products because it will help ensure that pricing for their products is accurate and trading activity isn’t manipulated. Also, crypto exchanges will probably benefit, as more regulation will likely boost customer confidence and trust.