Atom Asset Exchange (AAX) — an institutional-grade crypto trading platform — is partnering with Solidus Labs to use the latter’s market surveillance tools in combating manipulation in the cryptocurrency trading space.
The move is part of efforts by the London Stock Exchange (LSEG) Technology-backed exchange to improve its compliance with increasingly robust regulatory standards.
Crypto forensics is increasingly becoming important for exchange platforms especially as regulators in some jurisdictions are beginning to mandate that market participants improve market monitoring and surveillance. This insistence is part of global efforts to prevent the use of cryptocurrencies in money laundering and terrorist financing.
AAX to Deploy Solidus Labs’ Market Surveillance Tools
According to a press release shared with Blockonomi, AAX revealed its collaboration with Wall Street-based Solidus Labs to use the latter’s cryptocurrency surveillance framework. As part of the partnership, AAX will have access to Solidus Labs’ suite of surveillance and compliance software to detect potential market manipulation and other forms of cryptocurrency trading abuse.
The use of Solidus Labs’ crypto forensics framework upgrade’s AAX’s crypto market surveillance infrastructure to the standards set by participants in the mainstream asset trading arena. AAX plans to use the tools to detect spoofing, wash trading, cross-market manipulation, and pump-and-dump schemes among others.
Commenting on the partnership, AAX CEO Thor Chan remarked:
“We believe that all investors, retail and institutional, deserve fair markets, where prices are accurate and trade volumes are real. We are excited to partner with Solidus Labs to provide state-of-the-art market surveillance.”
Crypto Forensics Required for Greater Institutional Adoption
AAX tapping Solidus Labs for full-spectrum crypto trading forensics comes as regulators across the globe are insisting on total compliance with robust licensing and regulatory requirements. Indeed, jurisdictions like Hong Kong and Malaysia have introduced detailed listing requirements for cryptocurrency businesses in their respective markets.
In New York, the state’s Department of Financial Services (NYDFS) is also insisting on crypto companies adhering to industry-standard market monitoring protocols, stating:
“VC Entities are required to implement measures designed to effectively detect, prevent, and respond to fraud, attempted fraud, and similar wrongdoing.”
The NYDFS insisting on crypto companies deploying robust crypto forensic protocols is also making the notoriously difficult BitLicense even harder to obtain with Bittrex not getting the nod back in April 2019.
According to Chan, the move towards robust crypto forensics apart from helping platforms comply with regulators moves the industry into greater maturity. With rogue trading actions like spoofing and price manipulation out of the way, more sophisticated products like exchange-traded funds (ETFs) can emerge.
Indeed, the United States Securities and Exchange Commission (SEC) has consistently identified the absence of effective market surveillance as one of the reasons for refusing to approve a Bitcoin ETF. Many crypto pundits view investment vehicles like ETFs as major on-ramps for the entry of more institutional money into the cryptocurrency space.
Eradicating Market Manipulation in the Crypto Trading Space
Exchanges are increasingly moving towards deploying crypto trading monitoring systems. As previously reported by Blockonomi, Chainalysis has partnered with a few platforms to utilize its Know-Your-Transaction (KYT) compliance. Cryptocurrency exchanges already using the KYT infrastructure include Paxful and Bitfinex.
Apart from Chainalysis, Nasdaq is also providing cutting-edge crypto monitoring services to cryptocurrency exchanges via its SMARTS Market Surveillance toolset. Back in 2019, reports emerged that about seven crypto exchanges — including Gemini and SBI Virtual Currency — were already utilizing the Nasdaq technology in combating illegal trading activities.