Solidus Labs has introduced a tool for tracking cryptocurrency transactions and market manipulations. The decision is aimed at creating a loyal attitude of regulators towards Bitcoin ETFs.
Earlier, the US Securities and Exchange Commission (SEC) stated that the main reason for rejecting applications for launching exchange-traded funds (ETFs) on Bitcoin is market manipulation. So, last year, the SEC rejected a joint application by Bitwise Asset Management and NYSE Arca to launch a Bitcoin ETF. In addition, the agency has repeatedly rejected the request of the Winklevoss brothers, founders of the Gemini exchange, to create an ETF for Bitcoin.
The Solidus Labs developers reported that they have created a dedicated tool to solve this problem. It will allow you to monitor the market, check data on cryptocurrency transactions and identify possible manipulations on different platforms. Chen Arad, COO of Solidus Labs, said traditional markets have the same problems and are being addressed with dedicated market surveillance systems.
According to Arad, the Solidus tool has four functions: collecting, storing and processing data, and providing reporting. The program collects data from virtual asset service providers (VASP) and cryptocurrency exchanges, which will act as “information intermediary”. At the same time, exchanges will not have to exchange confidential data on trade operations with each other.
The system then processes the information and also compares data on buying and selling digital assets. This is necessary in order to track market manipulations and suspicious transactions that may be associated with money laundering. Solidus CEO Asaf Meir said data processing also includes comparing market data from different marketplaces and analyzing user activity.
In addition, Solidus verifies that exchanges comply with regulatory reporting requirements. The tool analyzes which cases exchanges report to their clients and regulators, and which parties might be involved, before exchanges start sending alerts. The Solidus product works with sensitive data that will be provided by exchanges, brokers and regulators.
Arad noted that Solidus technology can be used in different jurisdictions. It should be seen as an international standard to help exchanges comply with the Financial Action Task Force (FATF) rules. Solidus management is already in talks with several regulators and cryptocurrency exchanges willing to use this tool in the US. Arad added that Solidus was developed specifically to address regulatory issues and is already being used by several clients outside the United States.
Note that last month, Securities and Exchange Commission (SEC) Chairman Jay Clayton expressed interest in ETF tokenization and the SEC’s readiness to adopt such instruments. However, Clayton will retire later this year , so it is not known if his successor’s views will be as loyal to tokenized ETFs.