One of Bitcoin’s (BTC) most substantial value propositions is that no one can create more than its fixed supply. However, an executive at a cryptocurrency exchange boldly claimed that some exchanges can only create and sell BTC in their own system, not on the blockchain, to manipulate the market.
In an interview with Cointelegraph, Serhii Zhdanov, CEO of the cryptocurrency exchange Exmo, shared his belief that market manipulation is still prevalent in the digital asset space and provided an example of how it can happen.
According to the executive, if someone wants to dump the market, they can go to an offshore stock exchange that doesn’t go through financial audits and ask for $ 100 million in BTC and use $ 10 million in Tether (USDT) as collateral. He explained that:
“The exchange simply adds these funds to the account, creating these Bitcoins only in their system. They do not exist on the Bitcoin blockchain. The client or internal market-making team then sells these $ 100 million equivalent Bitcoins by downloading the Bitcoin price. on all bags “.
To get their profits, market manipulators can therefore profit from arbitrage according to Zhdanov. “After the price goes down, they buy the same amount of Bitcoin at a much lower price and make a profit,” he added.
The CEO said fighting and preventing these potential events require stronger regulatory policies that are as comprehensive as the stock market. Zhdanov stressed that offshore exchanges also need to be regulated in the same way as tier one exchanges or limit transactions between regulated and offshore exchanges. With this, the executive believes the market will be a better place for investors of all sizes.
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Additionally, the executive pointed out that one of the obstacles to traditional cryptocurrency adoption is money laundering concerns. According to the CEO, compliance and more comprehensive regulation will make those concerns go away. He said:
“Crypto is a novelty that evolves rapidly, in essence it is very similar to traditional investment vehicles. Therefore, I think there are many things we can borrow from the stock market, where the regulations have been tested for a longer time. “
Finally, Zhdanov explained that at present, malicious entities such as hackers are more attracted to targeting cryptocurrencies rather than banks due to security breaches. The executive noted that security is also a key to wider adoption of digital assets.