Winklevoss Twins Hire Nasdaq to Watch for Crypto CheatersBy and
Their Gemini market to use Nasdaq market surveillance service
Investors have wondered who’s watching out for crypto fraud
The Winklevoss twins brought in the pros to keep cheaters off their cryptocurrency exchange.
Their company, Gemini Trust Co., hired Nasdaq Inc. to conduct market surveillance for Bitcoin and Ether trading as well as the auction that helps price Cboe Global Markets Inc.’s Bitcoin futures, according to a statement Wednesday. It’s the first partnership between a well-known exchange like Nasdaq and a digital-asset market to help safeguard the nascent $433 billion cryptocurrency sector.
The deal could reassure investors of the reliability of New York-based Gemini, operator of one of the largest U.S.-based cryptocurrency exchanges. Practices like spoofing -- a form of cheating that regulators have spent years stamping out in futures and equities markets -- have fueled concerns about whether crypto trading is adequately monitored.
Nasdaq’s surveillance “is tried and true technology that’s used by some of the largest exchanges in the world, so it’s an obvious fit,” Cameron Winklevoss said in a telephone interview. “We love rules-based markets when the playing field is clear and straightforward and there’s transparency.”
One of Gemini’s rivals said earlier this week that crypto traders don’t care about whether markets are abused. San Francisco-based Kraken said on its blog that “being protected from market manipulation” doesn’t matter to most crypto traders. Last week, Kraken rebuffed an attempt by the New York State Attorney General Eric Schneiderman to gather information about how digital asset exchanges operate. Trading on Kraken helps value CME’s Bitcoin futures contracts.
Cameron and his brother, Tyler Winklevoss, founded Gemini in 2015. Cameron said that Gemini for now is satisfied with its own matching engine technology -- the software that pairs buyers and sellers -- another service Nasdaq provides to markets around the world.
“We’ll always be looking at other options but we have no immediate plans” to outsource that core trading function, he said.
Cameron Winklevoss said that policing markets should be required as the industry matures. “We don’t want to be the only player with a market-surveillance program,” he said.
Famous for running its namesake stock exchange, Nasdaq has for years sought to also capitalize on its expertise in surveillance and trading technology. Nasdaq said its Smarts surveillance system “automates the detection, investigation and analysis of potentially abusive or disorderly trading,” and is used by more than 45 markets and 17 regulators.
Nasdaq provides surveillance, trading and clearing services to other cryptocurrency exchanges besides Gemini, Chief Executive Officer Adena Friedman said in an interview Wednesday, declining to identify them. As for Gemini, “the fact that they’re choosing to work with us is a testament to them and the quality of what we provide,” she said.