Exposed for engaging in proprietary trading for years, Crypto.com admits: has internal market makers, no special treatment

An anonymous source reported to the Financial Times that Crypto.com has had an in-house trading team for years and privately prohibited employees from disclosing the existence of its market makers. This has been a common operating model for centralized exchanges. Crypto.com has openly admitted to having market makers and emphasized that there is no special treatment.

Crypto.com Accused of Proprietary Trading

Financial Times reported that according to five sources, Crypto.com deployed an internal team to trade tokens for profit, engaging in proprietary trading and market making.

The report cited SEC Chairman Gary Gensler discussing the phenomenon of crypto exchanges mixing various securities roles:

These platforms that call themselves exchanges mix a lot of functions. In traditional finance, you wouldn't see the New York Stock Exchange also running a market maker or a hedge fund.

Crypto.com: Has Internal Market Makers, No Special Treatment

The report stated that since its establishment in 2016, Crypto.com's possession of an internal trading team has been relatively unknown.

Sources claimed that Crypto.com executives always exaggeratedly declared to the public that the platform never engages in trading, but in reality, they privately instructed employees not to disclose the existence of internal market makers.

Crypto.com responded to the Financial Times:

We did not ask employees to lie. We have internal market makers, but the treatment of these internal market makers is identical to third parties, both optimizing spreads and efficiency on the platform. This is not a controversial practice.

It stated that the platform mainly caters to institutional traders, which is its main source of revenue. Crypto.com operates as a broker-dealer, acting as the counterparty to users' trades and hedging positions on other exchanges.

However, sources pointed out that the sole objective of proprietary trading firms is to make money, not to facilitate platform trading.

Crypto.com Suspends Institutional Services

Shortly after the SEC filed a lawsuit against Binance, Crypto.com immediately released a statement stating that due to limited demand from U.S. institutional users, they decided to suspend related trading services, but retail trading services remain unaffected.

It claimed that it may resume institutional trading services in the future but refused to disclose details and conditions for the restart.

This decision is widely seen as being influenced by SEC enforcement: Crypto.com suspends institutional services, while Robinhood delists ADA, SOL, MATIC.