Major US crypto exchanges lobbied lawmakers to strip language from pending legislation that would mandate trading in tokens resistant to market manipulation. The provision, part of a broader crypto bill under Senate consideration, would have required exchanges to list only assets meeting specific anti-manipulation standards.
Three unnamed companies pushed for removal of the clause requiring tokens be "not readily susceptible to manipulation." Sources tell CoinTelegraph the exchanges succeeded in their lobbying effort, with the problematic language removed from the bill's current version.
The move reflects tension between retail protection and industry interests. Regulators want exchanges to prevent pump-and-dump schemes and wash trading on low-liquidity altcoins. Exchanges resist restrictions that could shrink their token listings and trading volumes, particularly for smaller projects that generate fee revenue.
This legislative tug-of-war mirrors broader 2024 battles over crypto regulation. The SEC and CFTC have pushed for stricter token standards, while the industry argues compliance costs stifle innovation. Exchanges like Coinbase and Kraken face pressure from both sides. Listing standards directly impact their business models. Fewer tradeable tokens means lower trading fees and reduced competitive advantage against rivals.
The removed provision would have mirrored existing equity market rules under Regulation SHO, which restricts short selling in low-volume stocks prone to manipulation. Applying similar logic to crypto makes sense from a consumer protection standpoint, especially given altcoin rug pulls and coordinated pump schemes that flourish on lesser-regulated exchanges.
Removing the language marks a lobbying victory for exchanges but a setback for retail investors. Without manipulation safeguards baked into law, bad actors retain flexibility to launch volatile tokens on complicit platforms. The provision's deletion suggests the crypto industry retained meaningful influence over Senate negotiations despite heightened regulatory scrutiny.
The bill still moves forward with other provisions intact, but the manipulation language removal weakens consumer protections in the final legislation. Industry advocates frame this as pragmatism. Critics see it as regulatory capture.
THE BOTTOM LINE: Exchanges successfully lobbied Congress to kill token manipulation safeguards, prioritizing trading