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Seed CX Has Barred Employees From Crypto Trading
Some companies go as far as barring their employees to trade cryptos because they might affect the market and that is just what SeedCX, a crypto exchange, has done. Coindesk reported on this story this week.
In the article, a man called Alex Wachli is featured. He traded cryptos since 2014 but, to enter the company, the software engineer had to give up trading. Seed CX does not let any of its roughly 40 employees trade. Walchli had to lock his crypto funds and give wallet addresses to the company’s compliance team in order for them to monitor their holdings.
The decision was taken, according to the company, because Seed CX is against the conflict of interest that can happen when employees trade cryptos. The policy was quietly started last year and it was one the most strict ones in the industry so far.
Traditional capital markets have very strict laws for how employees can or cannot trade in the markets they work in, but most exchanges still consider cryptos the “Wild West”, so regulations are not that much clear.
For instance, in the securities industries, you are forbidden from trading stocks when you know that a company will announce a merger or recall a defective product, for instance, so you could be sued for illegal insider trading. The company is very careful because it does not know what this could actually mean in the crypto context yet and they do not want to have any problem.
The main difference is that crypto assets are open source most of the time and that all trades are visible on the blockchain, so they are significantly different from these other ones. Sometimes people working at exchanges are more well-informed about trading trends, technical issues and liquidity or the listing of certain assets.
In the most traditional spheres of finances, it is certainly rarer for exchanges to be very powerful as the ones from the crypto market are. Because of this, the co-founder of Seed CX, Edward Woodford, has decided in favor of the no-trading policy, which he believes that will help the company as the terms are not yet established in the industry and they could be changed soon.
In avoiding all this risk, the co-founder of the company believes that the company might be protected later.
Other Companies
Binance has told Coindesk that it has a very “strict policy” against insider trading and that it is a very similar one to investment banks, however, they did not make it clear how the policy actually worked.
Coinbase’s Chief Legal Officer, Brian Brooks, has affirmed that the company only requires the most powerful members of the team, the ones with the decision-making process, to self-report their earnings. All employees have to sign a contract, though, and there are certain blackout windows when they launch new assets on the platform, for instance.
The policy created by Coinbase is old and has several years of existence. Despite this, its employees were already accused of insider trading when Bitcoin forked with Bitcoin Cash in 2017.
In addition to the restrictions, all employees of Coinbase need to have a written approval from the legal team in order to trade over a certain amount of tokens. This was made to stop them from manipulating the market and affecting it too much.
However, Michael Oved, known as a Wall Street vet and the AirSwap co-founder, has affirmed that this might not be enough. People who work in the traditional industry and invest in any kind of asset have to be compliant all the time. Every transaction that they make needs to go via compliance. Only companies like Seed CX have this level of thoroughness.
The Future
At the moment, the future of the whole crypto industry is very unclear. However, Coindesk has talked to some experts during its initial report in order to discover what is most likely to happen.
Many experts believe that the market will evolve in ways that more than self-reporting will be enforced. For instance, the attorney Jeremy Deutsch, which is a shareholder of Anderson Kill, an important law firm, has affirmed that almost all banks and capital market exchanges monitor their employees.
They may be restricted on trading, having their communication like emails monitored closely and even having external transactions like even buying real estate property either restricted or looked closely at.
The expert sees no reason as to why people who work with cryptos should not be held to the same standards as the rest of the industry. Even beyond securities markets, people have these restrictions. He simply sees no justification for not applying the same set of rules for these people who have the ability of having such a privileged access to the market.
He believes that in 2019 we might see more companies requiring their low-level employees to be more monitored than they currently are. Otherwise, he affirmed, people will start to see a huge amount of private litigation in the industry.
In the end, that is the whole point of Seed CX. The exchange wants to be fair game and it wants everybody to know it. The policy benefits the employees from being falsely accused of insider trading and the customers from being victims of insider trading. Therefore, there is a big consensus that the measure is both for everybody in the company.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.