Can exchanges create imaginary Bitcoin to dump price? Crypto platform exec answers

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One of the most important basic value offerings of Bitcoin (BTC) is that no one can create more of it apart from a fixed supply. However, one cryptocurrency exchange executive made a bold claim that some exchanges can create and sell only BTC that is in their system, and not in the blockchain, to manipulate the market.

In an interview with Cointelegraph, Serhiy Zhdanov, CEO of crypto exchange Exmo, shared his beliefs that market manipulation is still prevalent in the digital asset space and gave an example of how this can happen.

According to the CEO, if anyone wanted to get off the market, it would be possible to go to an offshore exchange that is not subject to financial audits and demand $100 million worth of BTC, using $10 million Tether (USDT) as collateral. He explained that:

“The exchange just adds this money to the account, creating only those bitcoins in their system. They weren’t on the Bitcoin blockchain. Then the client or this in-house market making team sells these bitcoins for the equivalent of $100 million with the bitcoin price dumped all over the place. stock exchanges”.
To get their profits, market manipulators can take advantage of arbitrage according to Gdanov. “After the price drops, they buy the same amount of bitcoin at a much lower price and make a profit,” he added.

The CEO said that combating and preventing these potential events requires stronger regulatory policies that are as comprehensive as the stock market. Zhdanov emphasized that external exchanges should also be regulated in the same way as first-tier exchanges or that transactions between regulated and external exchanges should be limited. With this, the executive believes that the market will be a better place for investors of all sizes.

Related: Analyst Claims Exchanges Are Selling Your Bitcoin, Crypto Exchanges Respond

In addition, the CEO noted that one of the barriers to cryptocurrency adoption is concern about money laundering. According to the CEO, more comprehensive compliance and regulations will make these concerns go away. He said:

“Crypto is a new thing that is rapidly developing, it is very similar to traditional investment vehicles at its core. So, I think there are many things that we can borrow from the stock market, where regulations have been tested over a longer period of time.”
Finally, Zhdanov explained that currently, malicious entities such as hackers are more attracted to targeting cryptocurrencies than banks due to security holes. The CEO noted that security is also key to the broader adoption of digital assets.

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