- The Winklevoss twins are teaming up with the exchange operator Nasdaq to catch crypto criminals on its exchange.
- Gemini will use Nasdaq’s Smarts surveillance technology to monitor the exchange venue.
Gemini, the cryptocurrency exchange founded by the Winklevoss twins, plans to use Nasdaq’s surveillance technology to sniff out nefarious activity on its trading venue.
The cryptocurrency exchange announced the deal with Nasdaq on Wednesday. As part of the deal, Gemini will use Nasdaq’s Smarts, a surveillance technology used across Wall Street, to identify unusual and potentially criminal trading behaviour on its venue. The news comes amid a crackdown by regulators concerned about manipulation and fraud in the Wild West world of cryptocurrencies.
“Since launch, Gemini has aggressively pursued comprehensive compliance and surveillance programs, which we believe betters our exchange and the cryptocurrency industry as a whole,” Tyler Winklevoss, the CEO of Gemini, said in a statement. “Our deployment of Nasdaq’s Smarts Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants.”
Regulators have been viewing crypto exchanges with increasing scrutiny. New York Attorney General Eric Schneiderman’s office sent out an inquiry to numerous cryptocurrency exchanges, including Gemini, requesting information about market manipulation and interruptions in service on exchanges. At the Securities and Exchange Commission, regulators are looking into whether certain digital currencies – including ether – can be deemed a security, people familiar with the situation told Business Insider.
Market manipulation in crypto has long been a concern. An academic paper in the Journal of Monetary Economics found a crypto trader was able to manipulate the bitcoin market in 2013 on the Mt. Gox exchange, thereby driving the price up by more than $US1,000 a coin. As noted by Business Insider’s Oscar Williams-Grut, pump-and-dump schemes are commonplace.
This isn’t the first time Gemini has partnered with a well-established exchange. Notably, it tried to get an exchange-traded fund for bitcoin off the ground with Bats, the exchange venue acquired by Cboe last year. Gemini also partnered with Cboe on its bitcoin futures product.
As for Nasdaq, it is preparing its own bitcoin futures product, which is not expected to go live until the second half of 2018. The exchange operator, which is known best for its listings business, sees a big opportunity in providing technology to the nascent market for digital currencies.
“The crypto space is certainly an area we’re closely following and keen to bring our expertise and leadership in the surveillance technology space to,” Valerie Bannert-Thurner, a senior vice president in charge of risk and surveillance solutions at Nasdaq, told Business Insider. “So yes, this is a growth area for us as a surveillance technology provider.”
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