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November 25, 2020

In Conversation With

Crypto Market Integrity


Yoann Turpin, head of trading at Wintermute, discussed how institutional investors are approaching crypto.

(5:17) “I was talking to some large institutional brokers this week who were telling me that they’ve just opened shop. They mostly opened shop, and it could be an interesting point for Solidus on the regulatory aspect, we see institutions coming more on the CME side or where things are really strongly regulated. Most likely it’s also because these brokers can cross trade, it’s easier for them to cross things and it’s easier for them to convince management. But there’s more and more traditional money coming into the space and I think the movements in the markets the last few months have helped that.”

The crypto market has come a long way since the third halvening event four years ago. JPMorgan is now accepting Coinbase and Gemini’s money, and it’s clear that crypto is here to stay. Chen Arad, COO of Solidus Labs, discussed what the industry needs to grow, saying the answer is integrity.

(10:12) “Another thing that’s unique to crypto is that you can see for example what we call hybrid forms of manipulation. I mean we all know wash trading, and we all know layering and spoofing that are common and are completely illegal in traditional markets, that happens a lot in crypto because there isn’t enough surveillance right now. By the way, it’s hard to know exactly how much it happens. But there’s a lot of reason to believe…that it happens very often,” said Arad.

Richard Johnson, founder and CEO of Texture Capital, asked Arad what changes the crypto market can expect to see in the next four years from an integrity point of view. Arad said that there is a desire among exchanges to grow integrity but there also challenges, saying:

(19:48) “More and more exchanges are talking about deploying market surveillance. At the same time, if you look at the CryptoCompare benchmarking report that I believe came out about a month and a half ago, last month, it ranks exchanges based on volume credibility. Out of 160 exchanges it ranks, only about 10% had a surveillance system in place and many of those were self developed, which by the way is becoming more and more of a regulatory challenge with locations like Hong Kong where the securities and futures commission there actually requires an independent reputable provider of market surveillance so that they can trust it better. So I think the recognition is there, it took a while and we’re there. And in the next couple of years we’re going to see more and more of those systems implemented. I expect that within the next year or two, almost every place in the world where you want to operate an exchange will require some sort of a license and those licenses will require similar checks and balances we see in traditional markets. What we need to do as a crypto ecosystem is make sure that we…develop the tailored tools that will enable and empower the exchanges vs. slow them down and then work together as a community to develop the tailored rules.”

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Gerelyn Terzo
Gerelyn caught wind of bitcoin in mid-2017 and after learning about the peer-to-peer nature of Satoshi's creation has never looked back. Previously she covered institutional investing and fintech for several major trade publications. Gerelyn resides in Verona, N.J.

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