Binance Tightens Market Making Rules In Wake of Crash Criticism

Binance, the world’s largest crypto exchange, is tightening rules for token issuers and liquidity providers on the platform following criticism of its digital asset market practices during the market crash in October.

In a blog post published on Wednesday, the exchange said crypto projects cannot have any revenue sharing model with market makers, and market makers cannot engage in projects that would manipulate prices or disrupt the liquidity of tokens. Binance said it would take “swift and decisive action against any abuse,” including blacklisting market makers.

“We are committed to ensuring transparency and integrity in the crypto industry,” Binance said in the post. “Protecting our users and maintaining a fair, trustworthy trading environment comes first.”

Scrutiny of cryptocurrency exchanges has intensified following the Oct. 10 crash, which wiped out $19 billion in leveraged bets from which the broader digital asset market has yet to recover. Some market participants, including DRW’s Don Wilson, criticized some exchanges’ practices during the meltdown as not neutral grounds for trading. Investors, especially retail investors, are still reeling from the October crash and have yet to return to crypto as small-cap cryptocurrencies or altcoins continue to decline.

In January, Binance co-founder and former chief executive Changpeng “CZ” Zhao said ongoing accusations that the platform bore responsibility for last October’s crypto market crash were “untrue.”

Market markets, which consist of firms ready to buy and sell assets at quoted prices, play an even more important role in the crypto market because liquidity for most tokens is weak and does not come from natural demand. Many tokens rely on contracts with market makers to maintain orderly trading and prevent the kind of wild price swings that could destroy investors’ appetite for holding these tokens.

Binance added that crypto projects must provide Binance with the details, legal entities and contract terms of the market makers they work with.

The post also included six red flags said to indicate manipulative market-making behavior, including a “persistent pattern of sell-side orders” with no similar buy-side activity and “coordinated” token deposit and sales activity across different crypto exchanges.

Binance has seen its deepening market share begin to erode following FTX’s 2022 crash. Decentralized exchanges like Hyperliquid have gained traction by offering increased transparency and newer technology.

This article has been generated from an automated news agency feed without modifications to the text.