LONDON: Major cryptocurrency exchange Coinbase said on Wednesday it will investigate accusations of insider trading, following a sharp increase in the price of bitcoin cash hours before it announced support for the virtual currency.
Bitcoin cash, a clone of bitcoin, jumped to $8,500 on Coinbase’s exchange on Tuesday afternoon, hours before the San Francisco-based exchange launched trading in bitcoin cash.
Meanwhile, bitcoin, the world’s most popular cryptocurrency, fell more than 10 percent on Wednesday to a one-week low of $15,800. Bitcoin has risen some 1,700 percent this year and nearly 80 percent this month alone.
“If we find evidence of any employee or contractor violating our policies — directly or indirectly — I will not hesitate to terminate the employee immediately,” Coinbase Chief Executive Brian Armstrong said in a blog post.
Additionally, Coinbase employees have been restricted from trading in bitcoin cash for several weeks, Coinbase said on Twitter.
Earlier on Tuesday, traders on Twitter alleged that news of Coinbase’s launch of bitcoin cash support had been leaked before the official announcement.
The latest developments have raised the red flag over the rise of bitcoin among several economies. Bank of England Governor Mark Carney on Wednesday repeated the BoE’s view that sharp moves in the value of bitcoin did not present a threat to global financial stability.
“At present, we don’t view it as a financial stability issue,” Carney said, adding that the combined value of bitcoin and other cryptocurrencies was around half the market capitalization of Apple Inc.
“So it’s significant ... but it’s more like an equity-type risk that’s spread fairly widely around the world.”
Meanwhile, the EU’s top official for the euro single currency on Wednesday pressed European regulators to urgently update financial rules in order to face bitcoin’s dizzying volatility.
“The developments relating to bitcoin and crypto-currencies in recent weeks require our heightened attention,” European Commission vice president Valdis Dombrovskis warned in a letter to the heads of three financial EU regulators.
The agencies must draw up new plans “as a matter of urgency ... in light of the recent market developments,” said the letter, seen by AFP.
Dombrovskis, a former Latvian prime minister, also urged the regulators for “further work to assess and potentially improve the applicability of our regulatory framework to bitcoin and crypto-currencies.”
For her part, US Federal Reserve Chair Janet Yellen has said bitcoin is not money and called on banks to be certain their digital currency transactions adhere to anti-money laundering statutes.
Bitcoin cash was created on Aug. 1 when Hong Kong-based exchange Bitfinex said a minority of bitcoin miners would create a new version of bitcoin to make trading faster and easier.
Bitcoin is a purely online currency created from computer code, in circulation since 2009. The identity of its creator or creators remains a mystery.
Unlike traditional currencies, it has no central bank and is not backed by any government. Instead, its community of users control and regulate it via the block chain, a shared public ledger on which the entire Bitcoin network relies.
It’s a mathematical process designed to provide anonymous and secure transfers and is intended to ensure that no single bitcoin can be spent in more than one place simultaneously.
Members of the network – known as miners – are pitted against one another as they race to solve increasingly complex cryptograms on extremely powerful computers. The fastest to do so are issued with new bitcoins as a reward for their efforts. This is the only way new bitcoins can be created.
There is a limit however to how many can be created, capped at 21 million units, and three quarters are already in circulation.
The cryptocurrency has a number of advantages: transactions are anonymous, transfers are almost instantaneous and free from charges: there is no price cap and no middleman.
Bitcoin is not without problems however: transactions are irreversible and it’s an extremely volatile currency, subject to wild fluctuations in price. Security is also an issue, with digital wallets stored in computers or phones vulnerable to theft by hackers.
The anonymous nature of bitcoin also makes it a popular currency for illegal transactions.