One of the most important offerings of Bitcoin (BTC) base value is that no one can create more of it apart from a fixed supply. However, one cryptocurrency exchange executive made a bold claim that some exchanges can only create and sell BTC that is in their system, and not in the blockchain, to manipulate the market.
In an interview with Cointelegraph, Serhii Zhdanov, CEO of cryptocurrency exchange Exmo, shared his beliefs that market manipulation is still prevalent in the digital asset space and gave an example of how this can happen.
According to the CEO, if anyone wanted to get off the market, it would be possible to go to an offshore exchange that is not subject to financial audits and demand $100 million worth of BTC, using $10 million Tether (USDT) as collateral. He explained that:
“The exchange just adds this money to the account, creating only those bitcoins in their system. They weren’t on the Bitcoin blockchain. Then the client or this in-house market making team sells these bitcoins for the equivalent of $100 million with the bitcoin price dumped all over the place. stock exchanges”.
To get their profits, market manipulators can take advantage of arbitrage according to Gdanov. “After the price drops, they buy the same amount of bitcoin at a much lower price and make a profit,” he added.
The CEO said that combating and preventing these potential events requires stronger regulatory policies that are as comprehensive as the stock market. Zhdanov emphasized that external exchanges should also be regulated in the same way as first-tier exchanges or that transactions between regulated and external exchanges should be limited. With this, the executive believes that the market will be a better place for investors of all sizes.
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In addition, the CEO noted that one of the barriers to cryptocurrency adoption is concern about money laundering. According to the CEO, more comprehensive compliance and regulations will make these concerns go away. He said:
“Crypto is a new thing that is developing rapidly, it is very similar to traditional investment tools at its core. So, I think there are many things that we can borrow from the stock market, where regulations have been tested over a longer period of time.”
Finally, Zhdanov explained that at the moment, malicious entities such as hackers are more attracted to targeting cryptocurrencies than banks due to security vulnerabilities. The CEO noted that security is also key to the broader adoption of digital assets.