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Coinsquare Admits to Manipulating Trading Volume

It is never a good day when your favourite cryptocurrency exchange admits to manipulating trades. This is precisely what happened to Toronto based exchange CoinSquare. The CEO of Coinsquare, Cole Diamond, and President Virgile Rostand will step down from company operations. This move came after a settlement reached by the Ontario Securities Commission. The sequence of events highlights both positive and negative aspects of the cryptocurrency industry.

CoinSquare Trading Volume

Canadian Regulators are on the Ball

In 2018, Canadian cryptocurrency exchange QuadrigaCX was responsible for the mismanagement of more than $190 million of investor funds. It appears that since then, Canadian investor regulators have been paying much more attention to cryptocurrency exchanges. The detection of wash trading at CoinSquare is the latest scheme to be foiled by the Ontario Securities Commission (OSC). Specifically, CoinSquare was inflating trading volumes by as much as 90%. This makes it look like there is much more activity on the platform than there actually is. This sort of scheme is used to misrepresent the volume of activity, and popularity of the platform. This is dangerous because investors can be tricked into trusting the platform based on incorrect information.

Wash trading is a highly prevalent phenomenon in the cryptocurrency space. It is estimated that 90% of trading volume is simulated and fake in the first place. It is difficult to know whether or not an exchange is engaging in wash trading or not. The actual trading volumes are not accessible to the public. Therefore, the volumes that are made public, or reported by the exchange need to be taken at face value. That is because unlike blockchains, exchanges are closed proprietary systems. Exchanges do not operate transparently with respect to volume. It is important to choose exchanges that have a good track record, and history of legitimate activity. One such exchange is Kraken.com.

CoinSquare Executives to Face Penalties

Following the conclusion of the investigation, CoinSquare executives Cole Diamond, and Virgile Rostand are to face penalties. Aside from paying the cost of the investigation conducted by the OSC, Cole and Virgin will pay $1 million and $900k respectively. One of the purposes of the penalties to create significant deterrents for other businesses engaging in similar activity. The purpose of the Provincial Security Commissions is to increase investor confidence and protect investors in all capital markets. This includes cryptocurrency markets. Holding organizations and individuals accountable for misdealings gives investors confidence that the regulators are properly doing their job.

Alternative Canadian Exchanges

Now that a conclusion has been reached, it is reasonable to expect existing CoinSquare customers to look elsewhere for investment options. The Canadian cryptocurrency ecosystem is actually fairly rich in high quality companies. A number of reputable companies conduct operations within the borders of Canada. Kraken, ShakePay, and Coinbase are three of the companies that customers are likely to migrate to. Each of these companies offer something different from the other. From fair prices, to ease of use, the aforementioned companies are highly rated, and regulated entities.