Yesterday, news came out regarding allegations made against Coinbase that suggested as much as 20% of all of the Coinbase trading volume came from internal trades, trades made by members of staff at the exchange. This called into question the integrity of the exchange’s workforce and even the integrity of the business on the whole. Many now believe that Coinbase may have been encouraging internal trading in order to benefit the company, which in turn puts the company at risk.

The allegations came after the New York Attorney General’s investigation into Coinbase, and various other exchanges. Since then, the Chief Policy Officer at Coinbase, Mike Lempes has spoken out, denying the accusations made by the NY Attorney General.

According to CNBC, Lempres has said:

“The company does not engage in proprietary trading. This comment was misreported in the media as 'self-trading,' which is inaccurate. Coinbase does not trade for the benefit of the company on a proprietary basis. In order to provide an easy-to-use customer experience, Coinbase Consumer quotes a price and then quickly fills the order from our exchange platform (Coinbase Markets). This takes advantage of the liquidity provided by the entire Coinbase ecosystem."

This comment does feel a little defensive and actually doesn’t really prove that Coinbase aren’t self trading for their own benefit. It seems that Lempres is confirming that yes, internal trades are taking place, but actually the media have misrepresented their justifications for this, instead, Lempres seems to suggest that the internal trading found is an essential part of the way the business operates.

Regardless of what is actually happening here, this is the result of an ongoing investigation that is sure to cause further trouble within a number of exchanges in the United States. What we are seeing here could well be the first steps towards cryptocurrency exchange regulation in the US and therefore, findings like these by the NY Attorney General are only going to be used as evidence to justify a hard approach and hard regulations on these exchanges.

Regulation might well be a good thing, but there is of course a dangerous boundary that needs to be met, we could well see exchanges in the US take on some big challenges in the coming months, challenges that could well have a big impact on cryptocurrency trading in the United States. Tie this in with the continuing work by the SEC and suddenly, we do have a real cause for concern.

CNBC