Sign up for our daily briefing

Make your busy days simpler with Axios AM/PM. Catch up on what's new and why it matters in just 5 minutes.

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Catch up on coronavirus stories and special reports, curated by Mike Allen everyday

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Denver news in your inbox

Catch up on the most important stories affecting your hometown with Axios Denver

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Des Moines news in your inbox

Catch up on the most important stories affecting your hometown with Axios Des Moines

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Minneapolis-St. Paul news in your inbox

Catch up on the most important stories affecting your hometown with Axios Twin Cities

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Tampa Bay news in your inbox

Catch up on the most important stories affecting your hometown with Axios Tampa Bay

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Charlotte news in your inbox

Catch up on the most important stories affecting your hometown with Axios Charlotte

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Please enter a valid email.

Please enter a valid email.

Subscription failed
Thank you for subscribing!

Illustration: Rebecca Zisser / Axios

The nascent cryptocurrency industry is making headway with mainstream investors, but there are still big concerns over insider trading and other unethical behaviors.

Why it matters: Unlike the traditional investment markets, which are overseen by multiple government agencies, companies and funds dealing with digital tokens are largely left to self-regulate. This could leave retail investors unfairly disadvantaged without the same levels of information, and remain a hurdle to getting institutional investors comfortable with crypto-assets.

For digital token exchanges, like Coinbase and Robinhood, extra knowledge about individual tokens can have an out-sized effect on trading.

Flashback: For example, take Coinbase's bumpy addition of Bitcoin Cash last fall.

  • Bitcoin Cash was created as a clone of Bitcoin, which meant that anyone who owned the cryptocurrency would automatically be entitled to the same number of Bitcoin Cash tokens.
  • Coinbase eventually announced it would roll out support for Bitcoin Cash a few months later to enable its customers to access their tokens via the company's digital wallets.
  • But just hours before the listing was publicly announced, there was a spike in the price of Bitcoin Cash, suggesting someone with knowledge of the plans may have leaked or acted on it.
  • Coinbase hired two outside law firms to investigate the matter and recently told Fortune that it found no wrongdoing. However, a class action lawsuit against Coinbase over this is still ongoing.

How they’re handling this: For the most part, cryptocurrency exchanges are borrowing from rules that more traditional exchanges currently follow, and which often are implemented by regulators like FINRA.

  • Many have developed their own internal policies that state that employees cannot share material non-public information with anyone outside the company, nor trade tokens their employer is about to list, with strict rules about trading.
  • Coinbase last month released a list of five tokens that it may add in the future, which may have helped curb potential leaks as it investigates each token. And, on Tuesday, it announced the hiring of its first chief compliance officer.

Hedge fund managers trading digital tokens have also spurred whispers and concerns over potentially unethical behavior.

  • As a tight-knit industry, it’s not uncommon for fund managers to be friends or in other relationships with folks developing token projects, giving them unchecked access to information or the ability to “pump and dump” a new token.
  • Some fund managers advise individual token projects, undoubtedly giving them special access to information.
  • “Those concerns are real… so many people in this group have capital with other people,” Ari Nazir, managing partner at crypto-hedge fund Neural Capital, tells Axios of the industry’s relationships.
  • Nazir adds that he’s created ethics rules for himself and coworkers, even though there's no such requirement to obtain his broker's license. For example, he asks entrepreneurs not to tell him certain information such as plans to be listed on a particular exchange. His team also documents all investment decisions and only trades within specific parameters to ensure nothing is done because of improperly obtained information.
  • Another question that comes up is the role of venture capital funds who purchase tokens—a much more liquid position than the startup equity they usually hold for years. Messari co-founder Ryan Selkis recently suggested that VCs, who often publicly praise their investments, should disclose their token sales to ensure they're not dumping tokens on retail investors.

Bottom line: "The government has a system for protecting retail investors and at the same time reining in fund managers—and the crypto industry can definitely learn from this,” says Nazir.

Go deeper

Dion Rabouin, author of Markets
46 mins ago - Economy & Business

Biden's inflation danger

Illustration: Sarah Grillo/Axios

President-elect Joe Biden's $1.9 trillion stimulus proposal has economists and bullish market analysts revising their U.S. growth expectations higher, predicting a reflation of the economy in 2021 and possibly more booming returns for risk assets.

Yes, but: Others are warning that what's expected to be reflation could actually show up as inflation, a much less welcome phenomenon.

Ina Fried, author of Login
3 hours ago - Technology

CES was largely irrelevant this year

Illustration: Sarah Grillo/Axios

Forced online by the pandemic and overshadowed by the attack on the Capitol, the 2021 edition of CES was mostly an afterthought as media's attention focused elsewhere.

Why it matters: The consumer electronics trade show is the cornerstone event for the Consumer Technology Association and Las Vegas has been the traditional early-January gathering place for the tech industry.

The FBI is tracing a digital trail to Capitol rioters

Illustration: Sarah Grillo

Capitol rioters, eager to share proof of their efforts with other extremists online, have so far left a digital footprint of at least 140,000 images that is making it easier for federal law enforcement officials to capture and arrest them.

The big picture: Law enforcement's use of digital tracing isn't new, and has long been at the center of fierce battles over privacy and civil liberties. The Capitol siege is opening a fresh front in that debate.