Digital asset exchange Coinbase will take action against front-running of new cryptocurrency listings on its platform as part of its “zero tolerance” approach.
In a company blog post, CEO Brian Armstrong announced new measures of listing and reviewing tokens on the platform to prevent traders from examining its listing information or software to guess what assets would be listed in advance of the wider market knowing. This included using on-chain data to check if Coinbase is testing new assets integrations.
“We’re also aware of concerns that some market participants may be taking advantage of information from our listings process,” Armstrong said on Thursday. “While this is public data, it isn’t data that all customers can easily access, so we strive to remove these information asymmetries.”
“We’re adding new forensic tools to better prevent front-running, while also ensuring that we can move more quickly to de-list assets that appear to be run by bad actors,” the company tweeted.
Front-running means using non-public information about upcoming token listings to invest in them before the wider market. Coinbase received reports of people seemingly buying particular assets right before their listing announcement and benefitting from the accompanying price movements, Armstrong said.
“Finally, there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity,” he said. “We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms.”
Armstrong said Coinbase’s trading policy restricts employees from trading in crypto assets on the back of material non-public information.
The platform aimed to list all legal assets while also protecting customers and maintaining a level playing field, Armstrong said. He laid out minimum listing requirements that included testing for legality, security, and compliance.
Some of the changes Armstrong announced included publishing decisions to list a token only when the decision had been made, labelling for newer and less well-known assets, and launching asset reviews and ratings.
“It’s always tricky to find the right balance on enabling innovation while simultaneously protecting customers from bad activity, but that is exactly the hard work that we need to do each day,” he said.
Coinbase is the largest crypto exchange in the US. It currently lists 174 coins, according to data provider CoinMarketCap. The company added 95 coins for trading last year, and more than 70 for its custody service, according to Bloomberg.
Source: Coinbase Cracks Down Front-Running of New Crypto Listings
While the exchange has faced fierce criticism from the crypto community over its asset listing criteria, Armstrong doubled down on its approach in his post. “At Coinbase, our goal is to list every asset that is legal and safe to do so,” he said, claiming that the exchange had no business in picking winners and losers.
Earlier this month, Coinbase came under heavy fire after UpOnly host and influential crypto trader Cobie publicly called the company out for listing relatively unknown, dubious projects with low market capitalizations, such as StudentCoin, Polkamon, and Big Data Protocol. Notably, Coinbase has neglected to list many other assets that play a crucial role in the cryptocurrency ecosystem, such as Terra and Fantom.
“Big Data Protocol, virtually completely dead prior to [the Coinbase listing blog post, has pumped 132% as a result of this news!” Cobie wrote, stressing that the coin had a market capitalization of only $1.5 million before the listing.
That wasn’t the first time Coinbase has listed questionable assets in favor of larger, more established projects. In February, the company was criticized for listing Pawtocol, another low-cap coin that claims to use blockchain “to improve the lives of pets and pet owners on a global scale.” Per data from CoinGecko, Pawtocol briefly rallied on the news but has since tanked, now more than 50% down since the listing and 84% short of its all-time high.
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