The Commodity Futures Trading Commission (CFTC), a US financial regulator, is implementing a financial surveillance tool created by Nasdaq to modernize its outdated infrastructure from the 1990s.
Nasdaq’s software aims to identify market abuse, such as insider trading and manipulation in both equities and crypto markets, according to Tony Sio, Nasdaq’s head of regulatory strategy and innovation. He stated:
“Customized algorithms recognize patterns indicative of suspicious activity in digital asset markets. It provides real-time analysis of order book data across crypto exchanges and cross-market analytics connecting activities in both traditional and digital asset markets.”
The monitoring system will receive data “sourced by the CFTC using their regulatory authority,” Sio explained.
The rise in pump-and-dump tokens between January 2022 and November 2024 exemplifies market manipulation. Source: Chainalysis
The ongoing discussion around financial surveillance in crypto remains contentious, with privacy advocates warning that such oversight could result in a digital “prison,” while others insist that anti-money laundering measures are crucial for the adoption of crypto by institutions.
Related: US Treasury’s DeFi ID proposal is akin to installing cameras in every home
DeFi sector increasingly wary of surveillance
The US Treasury Department is considering mandatory digital identification checks within decentralized finance (DeFi) smart contracts to mitigate illicit financial activities.
Fighting illicit finance was among the directives outlined in the White House’s crypto report from July, which also featured proposals related to tax and market structure for digital assets in the United States.
The report advised the Treasury Department and the National Institute of Standards and Technology (NIST) to formulate new know-your-customer (KYC) standards for digital assets.
Policy suggestions from the White House crypto report. Source: The White House
The report also recommended updates to the current NIST digital identity guidelines and improvements to identity credential tools.
“Transforming a neutral, permissionless infrastructure into one restricted by government-sanctioned identity proofs fundamentally alters what DeFi was designed to be,” stated Mamadou Kwidjim Toure, CEO of investment platform Ubuntu Tribe, in an interview with Cointelegraph.
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