Will US’ big crypto cleanup be final nail in coffin for bitcoin?

The Economic Times
May 24, 2018

Bitcoin and other crypto-currencies make up just a tiny slice of the global economy. But that doesn’t mean regulators can ignore the wave of scams, fraud and market manipulation designed to snare gullible punters. 

With U.S. law enforcers now probing trading practices such as “spoofing” – illegal and aggressive order cancellations designed to move markets – this looks very much like the beginning of a sustained crypto cleanup. Drawing investors back in, even with the promise of a less Wild West-style market, will take longer than cheerleaders expect. 

Probing price manipulation in crypto market was a natural next step for the authorities., which have ramped up scrutiny of everything from new token sales to crypto-hedge funds in recent months. There's plenty of data evidence to dig into, and the Commodity Futures Trading Commission and SEC have demanded information from a lot of companies. 

There are the “pump-and-dump” chat-rooms where traders take advantage of thinly traded digital currencies. Elsewhere, exchanges have been accused of being open to spoofing or so-called “wash” trading, where one entity buys and sells the same order. The popular Coinbase exchange faces allegations from clients of insider trading. 

Of course, it’s natural to question the authorities’ track record of putting spoofers and manipulators behind bars, even those working in traditional financial markets. It’s a fairly recent phenomenon. The practice of spoofing was only made illegal in the U.S. in 2010, and the first conviction was in 2015. In January, the CFTC announced the creation of a new Spoofing Task Force to “root out” the practice. So there’s still no established model for building a successful anti-spoofing case – what a jury would deem to be a suspicious level of order cancellations. 

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