Ali Raza
Exchange giant Binance has released a new feature dubbed Self-Trade Prevention (STP) to crack down on wash trading. The feature focuses on cracking down on users or a group of users that trade within themselves to create the illusion of increased liquidity and high trading volumes.
Binance unveils a new feature to crack down on wash trading
Binance noted that the new feature would only be available to the users that want to use it, and it will not affect the users who choose not to use it. The feature will only be available to those using the Binance API, which supports automated trading. Those using the Binance website and app will not use the feature.
Binance also noted that it has an active surveillance team and tools that monitor market activity to detect intentional self-trading and other market manipulation tactics. However, the exchange added that not all self-trading activities are intentional, as some large traders, such as liquidity providers, could have two orders of their own matched.
Binance’s new feature would be increasingly useful to traders who risk unintentional self-trading. The STP feature would ensure that the users conducting genuine market activities but at the risk of unintentional self-trading would have better trading efficiency and not pay extremely high trading fees.
The STP feature would also ensure that API users that choose to use it are protected from unintentional self-trading that might lead to them being investigated by regulators. The exchange also noted that the tool’s availability would promote the integrity of market data.
The launch of this feature comes at a time when the menace of wash trading has plagued the cryptocurrency market. A recent working paper by the National Bureau of Economic Research noted that wash trading accounts accounted for nearly 70% of the transactions conducted on non-compliant cryptocurrency exchanges.
STP feature launch comes amid Binance woes
The launch of this feature by Binance comes at a time when the Binance exchange is facing scrutiny over transactions with the seized Bitzlato exchange. The Binance exchange was one of the top counterparties of the Bitzlato exchange, which US authorities believe was used to launder money for the Hydra darknet marketplace. US authorities recently arrested the founder of Bitzlato.
The Binance exchange is also facing criticism over recent allegations that the exchange held customer funds in the same cold wallet used to hold collateral for B-Tokens. The report dented earlier claims by Binance that it held customer funds in segregated wallets. Last year, Binance published proof-of-reserves reports claiming its Bitcoin reserves are overcollateralized.
The BUSD stablecoin has also reported a notable decline in the circulating supply since earlier reports about past errors with the BUSD peg this month. The BUSD circulating supply currently stands at $15.57 billion, representing a $1 billion drop in the last week and a $2 billion drop in the past month.
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This article was written for Business 2 Community by Ali Raza.
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