Coinbase has been quietly working on a new program to police its markets, and it’s hired a former NYSE exec to lead the effort


Coinbase CEO Brian
ArmstrongP

Anthony Harvey /
Stringer


  • Coinbase has brought on a former NYSE exec to build out
    a platform to monitor its crypto markets.
  • It’s the latest sign that crypto trading venues are
    aiming to look more like equity markets to mollify regulators’
    anxieties. 

Coinbase, the cryptocurrency exchange operator, is building out a
platform to better monitor its markets. 

The San Francisco-based firm has brought on Peter Elkins, a
former executive at the New York Stock Exchange, to lead the
efforts. Elkins, who previously was head of market surveillance
at the Big Board, is currently building out a team for the
so-called Coinbase Trade Surveillance Program, Elkins told
Business Insider in an interview. 

The point of the new program will be to create a best-in-class
platform to police Coinbase’s markets, which include its retail
brokerage and two professional exchange venues, Elkins
said. 

“This is similar to the projects I worked on at NYSE,” Elkins
said. “We are going to be deploying human insights and technology
to weed out bad actors.”

It’s striking that Coinbase is going in-house to develop such a
program considering its New York-based rival Gemini opted to
partner with equities exchange behemoth Nasdaq for its
surveillance efforts. 

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As Business Insider previously reported, Gemini is
using Nasdaq’s Smarts, a surveillance technology used across Wall
Street, to identify unusual and potentially criminal trading
behavior on its venue.

Similarly, Coinbase’s program will better identify unusual
activity include spoofing, a way to manipulate markets by sending
fake orders, as well as wash trading, Elkins said. 

The news of Elkins’ hire comes as questions of market
manipulation in crypto markets have reached a fever pitch
Notably, Bloomberg’s
Matthew Leising published a report examining more than 50,000
trades on Kraken’s market that experts said raised red flags
.
Specifically, they said it was unusual that large tether trades
failed to impact pricing on the venue.
Kraken mocked the claims in the report in a blog post

Elsewhere, academics at the University of Texas
published

a paper alleging that Tether was last year used to manipulate the
price of bitcoin
, propping up its run to $20,000 last
December. 

Regulators have expressed concern over the possibility of
rigged markets in crypto. And the move by both Gemini and
Coinbase illustrate the degree to which crypto trading firms are
trying to mollify their concerns.

The New York Attorney General’s office in April sent out
letters to 13 cryptocurrency exchange operators as part of a

broader crypto fact-finding mission aimed at protecting investors
in the nascent market for digital coins
. The office requested
information from crypto exchanges about manipulation, outages,
consumer protection, and other issues.

Initiatives to better monitor crypto markets could also
help lure new investors to the market, says Jay Biondo, a
product manager at Trading Technologies.

“Having effective surveillance is a key selling point.
Exchanges that announce that they are monitoring for
spoofing, wash trading, momentum ignition, and other manipulative
activity will likely attract more investors because those
investors will feel more confident that they are trading in
a fair and efficient market,” Biondo said. 

Prior to joining NYSE’s market watch team in 2015, Elkins was a
designated market maker on the floor of the exchange for over a
decade, holding positions at both Barclays and LaBranche &
Co. 

He joins a number of Coinbase employees who previously worked at
NYSE, including Christine Sandler and Eric Scro. 

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