Coinbase is changing its listing process to prevent front-running and insider trading. Going forward, the exchange will only issue its listing decision ahead of technical integration to prevent the spread of any on-chain data signals that can be exploited by the leaders. Despite the backlash, Coinbase said it would continue to list “all legal and safe assets.”
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Coinbase CEO Brian Armstrong has settled recent allegations of insider trading and foul play surrounding the exchange’s token listing. The exchange said it intends to continue listing any coin as long as “it is legal and safe to do so.”
Coinbase cracks down on front-running asset listings
The largest U.S. cryptocurrency exchange is changing its listing process.
In a blog post on Thursday, Coinbase CEO Brian Armstrong addressed general concerns within the community about the exchange’s listing process. He said the company was making changes to close any potential loops that could allow insiders to preempt its assets listing, but would not revise its review process.
Once an asset goes live, a Coinbase listing usually results in a surge in market price. In the past, sophisticated traders used differences in on-chain data and platform API responses to predict new asset listings. They would then preempt the listing by buying tokens elsewhere and sell them immediately after listing on Coinbase, hoping for a price surge following the listing announcement.On-chain proof of such an example spread on twitter on many occasions.
“While this is public data, it’s not data that all customers can easily access, so we work hard to eliminate these information asymmetries,” Armstrong explained in a blog post how the exchange plans to mitigate the problem. Coinbase will announce its decision to list assets after the asset decision is made and before any technical integration, he said, to prevent any on-chain data leaks that could be exploited by the frontrunners. The exchange will also begin flagging riskier assets, implement ratings and community reviews for each listed asset, and invest more in screening assets and detecting potential front-runs, possibly considering tokens before listing them Economics and on-chain data. “We won’t catch everything, but these investments will help us get better,” he concluded.
Addressing widespread suspicions of insider trading by Coinbase employees, Armstrong acknowledged that there is always the possibility that insiders at the company “willfully or inadvertently leak information to outsiders engaged in illegal activities.” However, Coinbase said it has “zero tolerance” for insider trading and will not hesitate to immediately fire any employee who aids and abets any nefarious activity.
List of problematic assets
While the exchange has faced fierce criticism from the crypto community for its asset listing standards, Armstrong doubled down on its approach in his post. “At Coinbase, our goal is to list all assets that are legal and safe,” he said, claiming that the exchange is not in the business of picking winners and losers.
Earlier this month, Coinbase came under fire after UpOnly host and influential cryptocurrency trader Cobie publicly called for the company to list relatively unknown, dubious and low-cap projects such as StudentCoin, Polkamon and big data protocols. Notably, Coinbase omitted to list many other assets that play a key role in the cryptocurrency ecosystem, such as Terra and Fantom.
Big Data Protocol was almost completely dead before the blog post, but it has risen 132% on the news!
After this surge, its market cap is now $3.3 million
So when Coinbase considers the addition, its market cap is only $1.5 million! Coinbase… 1.5m rly? LMAO pic.twitter.com/3WMihVKNdY
— Kobe (@cobie) April 12, 2022
“The big data protocol, in [the Coinbase] Listing blog post, up 132% on the news! ” Cobie wrote, emphasizing that the token had a market cap of just $1.5 million prior to its listing.
This isn’t the first time Coinbase has listed questionable assets in favor of larger, more established projects. In February, the company criticize Used to list Pawtocol, another low-cap token that claims to use blockchain to “improve the lives of pets and pet owners globally.” Pawtocol briefly rose on the news, but has since fallen, falling more than 50% since its listing and 84% below its all-time high, according to CoinGecko data.
Disclosure: At the time of writing, the author of this article owns ETH and several other cryptocurrencies.
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