Around 70% of unregulated cryptocurrency exchange transactions are money laundering.
That's according to a new study from the National Bureau of Economic Research (NBER).
Trade washing, the buying and selling of securities to create the appearance of increased trading volume and liquidity, is a form of market manipulation.
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The study analyzed data from 29 unregulated cryptocurrency exchanges and found that washed trades occurred more frequently on exchanges with low liquidity and high spreads. This shows that it can artificially increase the attractiveness of these exchanges.
The study, titled “Cryptocurrency Trading,” highlights the need for increased regulation and oversight of the cryptocurrency industry, saying, “Without proper regulation and vertical integration one cannot not seen in other markets, cryptocurrency exchanges may engage in market manipulation or even outright fraud."
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According to the researchers, the volume of washed trades represents on average 77.5% of the total trade volume on unregulated exchanges, with an average of 79.1%.
In particular, the washed trades calculated on 12 Tier 2 exchanges accounted for more than 80% of the total trading volume, the researchers said.
These estimates translate to more than $4.5 trillion in trades washed in cash markets and more than $1.5 trillion in derivatives markets in the first quarter of 2020 alone.
The researchers say that the laundry trade offers certain incentives, such as: B. Improving exchange rankings on data sites such as CoinMarketCap. This could have a positive impact on cryptocurrency prices in the short term.
Following the collapse of cryptocurrency exchange FTX, Ethereum wallet addresses linked to defunct Alameda Research earlier this week swapped several crypto tokens for Ether ETH/USD and USDT/USD before swapping them for Bitcoin BTC/USD with the network.
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