China’s financial watchdog warns against ‘manipulative’ exchanges

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A leading financial watchdog in China has issued a warning to investors, telling them to avoid using digital currency exchanges located outside the country. It asserts that these are prone to data manipulation and false presentation of volumes, accusing the exchanges of manipulating the information to suit their own purposes. The conclusion seems to back up a previous acknowledgement by CoinMarketCap that some volume data was faked.

China’s National Internet Finance Association (NIFA) published a report, indicating that there are risks associated with the participation in “speculative hype” found in overseas digital currency trading services. It explained that, based on research it had conducted, the platforms were determined to bypass regulatory controls and that some virtual currency trading platforms “register or set up servers overseas and continue to engage in related activities. These platforms often attract consumers’ attention with various gimmicks. For example, the international financial market has fluctuated recently. Some platforms have begun to hype the concept that ‘virtual currencies are safe-haven assets beyond gold and silver,’ but the actual situation is that their prices have fallen significantly [and consumer] losses are severe. Not only that, [but] these platforms also use robot programs to brush and tamper with data to create the illusion of “prosperity” in the virtual currency trading market.”

NIFA analyzed trading data of some exchanges and found that the daily trading turnover rate was more than 100% for over 40 digital offerings it reviewed. Another 70 offerings had daily rates greater than 50%, and these findings resulted in the agency determining that the exchanges were creating “false prosperity” in order to boost their positions in the market.

Many platforms, according to NIFA, will also create fake incidents to halt trading when things get tough. As the digital currency space has seen on a number of occasions, exchanges have repeatedly gone offline, suffered major outages or frozen assets with no explanation. The agency believes it has now found that explanation.

NIFA cautions investors to do more research before handing over any funds for trading purposes, and is ready to help prosecute any entity that breaks the law. It states that “any institution or individual should strictly abide by national laws and regulatory requirements, and not participate in virtual currency trading activities and related speculation. Member institutions should also abide by the industry’s self-regulatory requirements and take the initiative to resist illegal financial activities without providing convenience.”

Exchanges have had it fairly easy since there still aren’t any strict global regulations to control how they operate. The fact that CoinMarketCap admitted that some data was manipulated but didn’t suffer any consequences is proof enough. The exchange and digital asset listing service was just purchased by Binance, and the thought of an exchange being in control of a platform designed to offer an unbiased view of the digital asset ecosystem has raised more than a few red flags. The fact that Binance has no established headquarters, hence no one to which it is accountable, only makes the matter more disconcerting.