The cryptoasset market is engulfed by spoofing and flooding practices, fake orders, speculative trading, illegal activities, and traders causing prices to rise and fall according to their will. To look into these and other manipulative activities involving cryptoassets, the U.S. Department of Justice has opened an investigation. It’s going to do a lot more good than you think. Here’s why:
#1 Reduction in illegal practices
Illegal practices such as spoofing or flooding the market with fake orders to reel in traders into buying and selling. Spoofing is an illegal practice to affect prices. A financial regulator called the Commodity Futures Trading Commission oversees derivatives in relation to Bitcoin.
#2 Trading platforms take strict security measures
In June, the Winklevoss twins hired Nasdaq Inc to conduct surveillance of the trading of digital coins on their exchange.
Nasdaq Inc. is an American stock exchange.
#3 The absence of serious regulations will be fixed
The U.S. Securities and Exchange Commission (SEC) has been struggling for several months to regulate unreliable ICOs (initial coin offerings). The SEC created a fake ICO of its own to warn people against the problem. Celebrities are warned by the SEC against endorsing ICOs without proper disclosure. Floyd Mayweather and DJ Khaled were charged for endorsing a fraudulent ICO.
#4 Pump and dump schemes may come to an end
In 2017, a Business Insider investigation found so-called “pump and dump” schemes are widespread in cryptoasset markets. Pump and dump schemes involve people “pumping” the price of a particular crypto by bidding the price before “dumping” it on traders who do not suspect a thing. These traders are lured into the market by pumpers who claim that price is only going to increase.
#5 Addressing crypto risks
Risks such as volatility of cryptoasset reduce investment gains. There is a possibility of losing all your money. When hype around coins and tokens increases, you can earn money by buying them but there is a chance that this might turn out to bite you in the back. This is one of the schemes the U.S. Department of Justice is considering addressing.
#6 No more unregulated cryptoasset markets
Many cryptoasset exchanges are unregulated markets which have the power to do whatever they wish to with people’s money. The U.S. Securities and Exchange Commission has issued a warning that such exchanges should be registered as a national securities exchange.
#7 Speculative financial risk may be reduced
Factors like the introduction of more regulation or another hack of a major cryptoasset exchange, while it could dampen prices in the short term, may provide protection against speculative risks that Bitcoin and other cryptoassets continue to face.
#8 — Identifying tax evaders
Scams and techniques that have existed in the traditional market are making its way to crypto markets due to the poor regulations. This investigation might have the potential to unveil illegal practices carried on by traders, and could give some much needed formal recognition to the industry. It seems like cryptoasset is slowly being adopted by countries for real.