With the recent digital currency trading volumes plunging to rather new lows with every passing day in trade, some of the biggest crypto exchanges have started to embrace unorthodox practices to boost market activity and win shares.
Traditionally, trading exchanges have been charging lower fiat rates and do not require issuers to direct trading traffic to the exchange in question. This has begun to change quite recently, and a number of major cryptocurrency exchanges have been found active in rather dubious practices.
Platforms such as Bitfinex, FCoin and OKex have been found touting startups to drive depositors to their online trade platforms to get their coins listed there. Other crypto exchanges, such as Binance and KuCoin are putting listing fees that can differ project to project while many exchanges are introducing their own “native coins” which can be used by traders to vote on potential listings.
This unusual embrace by crypto exchanges has come after sweeping pain that has caused the digital currency market to collapse at least 50% on average. Trading volumes have plummeted by 80% since peaks earlier in the year. There has also been revelations of great market maturity and emergence of new types of coins and exchanges, which are essentially cheaper and easier to use. All these motives threaten to eat deeper into fee revenue for existing exchanges and account for their turn to the ‘dark practices’.
According to Bloomberg, Director of Technology Research at Digital Asset Research, Lucas Nuzzi is in agreement:
The market downturn has certainly contributed to an increase in unorthodox strategies by token issuers and exchanges.
These antics, may well be proving to be beneficial for the exchanges in the short term but can be confronted badly by startups and coin issuers looking to get exposure to investors. Such an incident is told by Christopher Franco, the co-founder of Washington, North Carolina-based blockchain startup Expanse.
He reported that KuCoin quoted him a listing of 50 Bitcoins (about $315,000) in current prices. With eventually resulted in Expanse not going through with a listing.
We can pay for it, but it doesn’t justify the means, Many startups prefer to invest such sums into research and development and marketing.
KuCoin went on to defend allegations of the 50 Bitcoin listing fee, saying that its listing price varies by startup and it is not disclosed. Spokesman Miles Wu said:
The listing fee is not the key factor for listing a project, the project itself is.
It is true that crypto exchange fees can be difficult to determine and two startups of the same size applying to list to the same exchange may be charged different rates. So the motivation behind turning to unusual moves is clear enough.
Fees have contributed about $1 billion to exchange revenues to date, according to Lex Sokolin of Autonomous Research. But such moves raise red flags for industry watchers which ”leads to inherent conflict of interest”, according to Asia Securities Industry and Financial Markets Association. Best-practices recommend charging a flat fee to all applicants “to avoid giving the impression that the exchange’s listing decisions are determined or influenced by the amount of money an issuer is willing to pay.”
What exchanges say
Jesper Cheng, spokesman for OKex reported that they are still receiving a lot of applications. He said that companies seeking a coin listing still have to meet listing standards and that simply delivering new users isn’t enough. Another exchange, FCoin, tells users to deposit their coins to earn a listing.
Another major exchange, Bitfinex is encouraging users to trade on its Ethfinex exchange by awarding tokens in proportion to their account activity. These tokens can then be used to vote on whether to allow new listings.
Head of Corporate Communications, Kasper Rasmussen reported that the practice gives the exchange’s most loyal traders a say on what coins are listed. Bitfinex recently tripled its listings to 270 tokens in an effort to boost declines in trading volumes.
The largest exchange by trading volume, Binance, says startups that instill their coin into the Binance ecosystem have a better shot at being listed. The exchange boasts listing of 380 coins and invites startups to make offers but doesn’t have a standard fee.
Binance CEO Changpen Zhao wrote in a blogpost:
All of these will definitely increase your priority of review and chance of listing. We remember people who help us.