Binance, the world’s largest crypto exchange, is tightening rules for token issuers and providers of liquidity on the platform following criticism of digital-asset market practices during October’s market meltdown.
In a blog post Wednesday, the exchange said that crypto projects cannot have any revenue-sharing models with market makers, and that market makers also cannot engage with projects to manipulate prices or distort liquidity of the tokens. Binance said it will take “swift, decisive action against any misconduct,” including blacklisting market makers.
“We’re committed to ensuring transparency and integrity across the crypto industry,” Binance said in the post. “Protecting our users and maintaining a fair, trustworthy trading environment comes first.”
Scrutiny of crypto exchanges intensified after the Oct. 10 crash, which wiped out $19 billion leveraged bets that the broader digital-asset market has yet to recover from. Some market participants, including DRW’s Don Wilson, criticized the practices of certain exchanges during the meltdown for not being neutral venues for trading. Investors — especially retail investors — are still reeling from the October crash and have yet to come back to crypto, as small-cap cryptocurrencies, or altcoins, continue to decline.
In January, Changpeng “CZ” Zhao, the co-founder and former chief executive officer of Binance, said lingering accusations that the platform bears responsibility for the crypto market crash last October are “far-fetched.”
Market markets, which are firms that stand ready to buy and sell assets at quoted prices, play an even more essential role in the crypto market because liquidity for most of tokens is thin and doesn’t come from natural demand. Many tokens rely on contracts with market makers to maintain orderly trading and prevent the kind of violent price swings that can destroy investors’ appetite in holding these tokens.
Binance added that crypto projects are required to report to Binance about the details, legal entity and contract terms of the market makers they are working with.
The post also included six red flags it said signal manipulative market-making behaviors including “a pattern of persistent sell-side orders” without similar buy-side activity, and “coordinated” token deposits and selling activity across different crypto exchanges.
Binance has seen its market share, which deepened after the collapse of FTX in 2022, start to erode. Decentralized exchanges like Hyperliquid have gained traction by offering increased transparency and newer technology.
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