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The U.S. regulator recently sued Binance and Coinbase, the largest cryptocurrency exchanges, accusing the platforms of trading unregistered securities and artificially boosting trading volumes. Former CFTC Chairman Timothy Massad believes that one of the industry’s sore points is fictitious trading, where someone trades with affiliates to mislead other users about the dynamics of trading.
Massad estimates that fictitious trading accounts for 50% to 90% of transactions on crypto platforms. Most exchanges conduct their own trading, which in principle should not be the case, with no procedures in place to prevent it, Massad said.
So the former CFTC chairman thinks the SEC should create a new industry framework that protects investors and also prevents fraud and market manipulation.. First of all, the new rules should provide a definitive answer to the controversial question: Are cryptoassets considered securities?
According to Massad, there are still few practical uses for cryptocurrencies related to the real economy. The question is how to create a structure in which these innovations can develop into things of real value, and at the same time protect investors. Massad is convinced that the business model of cryptocurrency exchanges is incompatible with the way current securities markets work.
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“One problem is whether bitcoin and ether, which are, say, commodities, can be traded on the same platforms as other assets. Given the SEC’s view, I don’t think it will be allowed,” Massad said.
Last year, Massad suggested that the SEC and CFTC merge to regulate the cryptocurrency industry, creating a special committee to do so.<br