The Dark Side of Cryptocurrency Exchange Listings

A potential scandal is brewing in the crypto industry, according to a recently published report by the Blockchain Transparency Institute (BTI). BTI’s recently published report looked into data collected on some of the largest cryptocurrency exchanges in the industry and found that some exchanges were using trading bots to wash trade on the exchange, to fake reported trade volume for prospective clients.
 

Plenty of companies are looking to sell their tokens as new investors and traders are getting introduced to the cryptocurrency markets in strong numbers. But, the typical main street investor, especially in the United States, heads on to crypto exchanges to purchase tokens. Investors access and trade Cryptocurrencies for fiats such as USD through cryptocurrency exchanges like Coinbase, Binance, and Gemini. Therefore, new blockchain projects looking to gain exposure to a wide audience of investors need to get their tokens listed on said exchanges, and that comes at a price.

Exchange Report

BTI found that the average blockchain project spent $50,000 last year on listing fees alone. Ideally, the transaction makes sense for all parties involved, that $50,000 should more than pay for itself by making the coin or token available to a large number of investors. Exchanges pay for the costs of operation by charging projects and in return, the projects gain exposure and potentially much larger users.

A recent Business Insider research found that some of the larger exchanges charge as much as $1 million per coin listed. And yet, not all exchanges are being completely honest with their numbers. Exchanges need a large number of users and daily volume to be able to charge these exorbitant fees. So, smaller exchanges that don’t move the same type of volume as exchanges like Coinbase and Binance have resorted to faking numbers to charge more for listing services.

A report by Autonomous research showed that the cost for a crypto listing range from $1 million “for a reasonably regarded token, to $3 million for an opportunity to get quick liquidity,”. That compares with the roughly $125,000 to $300,000 — plus $100,000 to $500,000 of annual fees — that exchanges charge to list fully registered equities, the report said.

The results of the research paints a dark picture for many exchanges, showing that much of their self-claimed volume was actually artificially created by the exchange itself. Even some well-known exchanges appear to be inflating their volume numbers according to the report.BTI estimates that the crypto ecosystem lost $100,000,000 in 2018 because of false volume and high exchange fees. 

Better Options

In the same report, BTI also released a list of “trusted exchanges” that don’t partake in such practices. BTI has concluded that even though larger exchanges like Binance charge listing fees, they don’t falsify trading volume data. In fact, the research shows that Binance and Bitfinex have the highest amount of real trading volume. Binance actually directs the fees to Binance Charity Fund (BCF), a venture aimed at providing relief funds to people suffering from poverty and natural disaster victims. Projects will be able to determine their desired fees (donations) themselves, which will be disclosed to the public by the initiative. The company claims it will not dictate any minimum viable donation fees. “A large donation does not guarantee or in any way influence the outcome of our listing review process,” added Binance CEO Changpeng Zhao.

Exchanges that don’t require fees for listing coins are also gaining traction in the nascent industry. For example, exchanges like Gate.io, Poloniex, and Bittrex employ no-fee structures when listing new coins. Bitrue was recently launched with the goal of becoming the most intuitive and secure crypto platform, describing itself as a project which is not just an exchange but rather a “community” as well as a “one-stop solution” for investors. The platform charges no listing fee, aiming to build “the most professional and clean” investment environment.

In light of recent findings, the crypto community is taking a stand against listing fees and recognizing them as a means to gain monetary incentives. Listing fee free exchanges have received the positive recognition that they deserve through this ordeal and will certainly help the industry grow stronger.

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