Crypto Traders Want to Kick Out Scammers from the Crypto Pool

By Kapil Gauhar

The biggest crypto traders are calling time on the horde of criminals and con artists who have flocked to their largely unregulated market.

Companies like Cumberland crypto unit of DRW Holdings Inc, Mike Novogratz’s Galaxy Digital Holdings and Ripple discussed creating a blacklist of counterparties recognised to renege on trades or engage in nefarious activities, at a gathering in Chicago on Tuesday. An alternative suggestion was to make accreditation of firms in good standing as approved by a loose association of cryptocurrency businesses known as the Crypto OTC Roundtable Asia, or CORA.

While the decade-old cryptocurrency market attracted the top developers and technologists, and a flock of former Wall Street traders, it has been a magnet for the criminals and scammers. As if to make a point, at the same time as the cryptocurrency traders were meeting in Chicago, the world’s largest cryptocurrency exchange, Binance, discovered hackers had stolen 7,000 Bitcoins worth about $40 million, that briefly sent the digital-token market down about 3%, before it recovered.

Darius Sit, a Swiss-based managing partner at QCP Capital, said –

“A community-wide effort to improve compliance standards would prevent liabilities that might stem from trading with bad actors or dealers that trade with bad actors. A self-governance initiative like this is also something that regulators are keen to see.”

The other recommendation at the Chicago gathering that saw traders from 35 digital assets firms huddle in a monochrome conference room with no windows and black walls was a common standard to verify customer identities as well as the source of funds. Further ideas incorporated having CORA disseminate information on counterparties which have defaulted on derivatives trades.

CORA and the traders made no firms decisions on a whitelist or a blacklist and will discuss the same in further forums on how to proceed with the ideas raised at the event. The first CORA gathering took place in January this year, in Singapore.

Vishal Shah, the Sr. Traders at Greenwich, said –

“The definition of a bad actor is elusive and there could be numerous idiosyncratic reasons, such as a processing error at a crypto bank, that could cause a counterparty to technically default on their obligations. Such occurrences are unique and frequent, making a standardized implementation of a blacklist tough. There is also the question of legality, and on the cover, it looks more sinister than its intent.”

The Trusted Trading

The event that drew traders from Singapore to San Francisco outlined the collective will among the major players in cryptocurrency space to impose standards from traditional finance on their immature market. Also, it made clear that there is still much to do for establishing an ordered and trusted trading environment, particularly in the over-the-counter derivatives contracts CORA is centred-around.