- Coinbase will make changes to its process for new crypto asset listings to avoid front-running.
- Some traders might use on-chain data to detect upcoming listings, the crypto exchange said.
- Front-running uses non-public information about upcoming token listings to invest in them ahead of the broader market.
Digital asset exchange Coinbase will take action against the launch of new cryptocurrency listings on its platform as part of its “zero tolerance” approach.
In a company blog post, CEO Brian Armstrong announced new registration and token review measures on the platform to prevent traders from examining his registration information or software to guess. which assets would be listed before the market knows. This included using on-chain data to verify whether Coinbase is testing new asset integrations.
“We are also aware of concerns that some market participants may take advantage of information from our listing process,” Armstrong said Thursday. “Although this is public data, it is not data that all customers can easily access, so we are working to remove these information asymmetries.”
“We’re adding new forensic tools to better prevent front-running, while ensuring we can act faster to delist assets that appear to be run by bad actors,” the company said. tweeted.
Moving forward means using non-public information about upcoming token listings to invest in them ahead of the broader market. Coinbase has received reports of people apparently buying particular assets just before their listing announcement and benefiting from the accompanying price movements, Armstrong said.
“Finally, there is always the possibility that someone inside Coinbase could, knowingly or unknowingly, disclose information to third parties engaging in illegal activities,” he said. “We have zero tolerance for this and we are monitoring it, investigating where necessary with outside law firms.”
Armstrong said Coinbase’s business policy prohibits employees from trading crypto assets based on material, nonpublic information.
The platform aimed to list all legal assets while protecting customers and maintaining a level playing field, Armstrong said. It defined the minimum registration requirements which included legality, security and compliance testing.
Some of the changes Armstrong announced included publishing decisions to list a token only when the decision had been made, labeling newer and lesser-known assets, and launching asset reviews and ratings.
“It’s always difficult to strike the right balance to enable innovation while simultaneously protecting customers from bad business, but that’s exactly the hard work we have to do every day,” he said.
Coinbase is the largest crypto exchange in the United States. It currently lists 174 coins, according to data provider CoinMarketCap. The company added 95 coins for commerce last year and more than 70 for its custodial service, according to Bloomberg.