Coinbase Wants To Be Transparent. But Crypto Insider Trading Is Cloudy

Coinbase Wants To Be Transparent. But Crypto Insider Trading Is Cloudy
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Coinbase’s efforts to become more open have only muddied the waters, with Twitter users accusing the company of insider trading.

Speculators have long pushed for Coinbase and other major exchanges to include their preferred cryptocurrencies, believing that doing so would provide credibility and liquidity, especially for younger tokens. On Monday, the crypto behemoth stated that it would begin publishing a list of coins that are being considered for inclusion, with three dozen being added this quarter.

Coinbase had historically maintained its ambitions under wraps, so the surprising action caused some consternation. Jordan Fish, also known in the field as Cobie, a well-known crypto podcaster, quickly offered a theory.

Fish said he discovered an Ethereum wallet that had “purchased hundreds of thousands of dollars” worth of tokens “entirely highlighted” on the Coinbase list “approximately 24 hours before it became published” on Tuesday.

“An effort to promote openness by disclosing even more information symmetry as feasible,” Coinbase said of the “pilot.” It also included a description of how Coinbase determines its listing choices, in addition to the list of tokens. A company spokesman told Protocol that the firm “had nothing further to share” about the listing news.

Fish’s scheme is a classic front-running strategy. It’s a wager based on intimate knowledge, in this case the listing of a cryptocurrency on a large exchange such as Coinbase. The publication of a token frequently drives its price up due to the liquidity provided by Coinbase’s large client base.

Also Read: According To The CEO Of The Crypto Firm, Bitcoin’s Price Could Reach $100,000 Within A Year

Coinbase must record cases of insider trading in its stock because it is a publicly traded firm. But what about digital currency? It’s unclear who could or would take action, as the US authorities are still undecided whether tokens are securities or commodities.

Token listings have been a source of contention for cryptocurrency exchange in the past. Employees were accused of buying Bitcoin Cash ahead of its first public offering (IPO) in 2019. Binance was probed by the CFTC for insider trading in 2021. (At the time, Binance stated that it had a “zero tolerance” policy for insider trading.)

In 2019, UCLA law professor Andrew Verstein argued in the Iowa Law Review, “Insider trading doctrine certainly applies to most famous crypto assets and their traders.” “The legal requirements for insider trading regulation, such as jurisdiction, material nonpublic information, and violation of duty, are commonly met.”

However, enforcement may remain difficult until legislators and officials address some of the major issues surrounding bitcoin.

Silicon Valley investment and Stanford Graduate Business school lecturer Rob Siegel says it’s “impossible to know” if the Coinbase disclosure and Fish’s assertions are connected.

But, he continued, “considering that crypto is frantically fighting for legitimacy,” adopting a new policy for token announcements makes sense for Coinbase.

He told Protocol that “disclosure is good in many circumstances for conflicts of interest.” “Perhaps this is Coinbase enforcing good governance in order to stay clean.'”

“A catalyst” for the Coinbase statement, according to Michael Fasanello, LVL’s chief compliance officer, “may be to mitigate charges of insider trading,” he hypothesised.

Coinbase’s announcement came at an unusual time, according to observers.

The Coinbase blog post “makes it appear an awful lot like Coinbase knew somebody had a data edge and had already reacted on it,” according to Alex Johnson, editor of the Fintech Takes newsletter.

Also Read: Justin Bieber, Gwyneth Paltrow and Ashton Kutcher Are Among Dozens Of Celebrity Investors Piling Into Crypto Startup MoonPay

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