Following Insider Trading Accusations, Coinbase Moves to More Stringent Review System

Coinbase is seeking to implement several changes to its crypto listings including limiting on-chain data and providing a ratings system


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key takeaways

  • Coinbase CEO Brian Armstrong announced several changes to the way the platform would announce and list new cryptos
  • Armstrong also addressed long-term concerns over alleged insider trading abuse

US-based cryptocurrency exchange Coinbase said Thursday it’s aiming to change the way it lists and reviews new digital assets

CEO Brian Armstrong in a blog post said his company would make changes over the “next few quarters” to prevent on-chain data from being utilized by savvy traders.

Until now, traders have been able to use data to detect when the exchange may be testing for new digital asset integration or via changes to the platform’s API responses to those projects.

Going forward, Coinbase said it would attempt to prevent on-chain data from giving a signal to watchful traders by removing those “information asymmetries.”

Armstrong also addressed criticisms leveled at company employees over their purported actions to buy up a certain asset before it was announced or listed on the exchange.

“There is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity,” Armstrong wrote.

It’s the first time the CEO has publicly addressed concerns from market participants that certain projects appear to pump in price prior to a Coinbase listing. Many have suspected Coinbase employees to be conducting insider trading.

Armstrong reiterated the company maintains strict policies that attempt to prevent instances of insider trading, including that all employees trade crypto solely on Coinbase’s trading platforms as well as having a dedicated trade surveillance leveraging advanced software to investigate potential abuse.

The company also said it would label newer and less proven assets, in an effort to educate potential traders on their risks.

Coinbase will seek to provide a rating system, it said, that would provide additional community info prior to and after listings.

“Many consumer services today utilize the wisdom of crowds to help consumers make more informed buying decisions,” Armstrong wrote. “We believe ratings and reviews can help create additional consumer protections in crypto, and ideally these can be decentralized in new protocols over time.”

The exchange also said it would continue to improve its evaluation capability by reviewing the tokenomics of a given asset while using “on-chain forensic tools” to assess each project.

“We won’t catch everything, but these investments will help us get better, and we may be able to open source these approaches and standards to the industry over time,” Armstrong wrote. “These are still early days for crypto, and it’s going to take time for us to figure everything out.”

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