Binance strengthens regulations for market makers, requiring token issuers to reveal their partners.

The regulations prohibit profit-sharing and guaranteed return agreements, aiming to mitigate conflicts of interest and manipulative trading practices.

(Vadim Artyukhin/Unsplash)

Key points:

• Binance has introduced new regulations for market makers, mandating them to reveal their identity, contract details, and additional information.
• The regulations prohibit profit-sharing and guaranteed-return schemes to avert conflicts of interest and manipulative trading.
• Binance indicated it will oversee market maker activities and take action against inappropriate conduct, such as token sales that conflict with release schedules or artificially boosting trading volume.

Binance, the leading cryptocurrency exchange by trading volume, has issued guidelines that impose stricter responsibilities on token issuers and liquidity providers.

The updated regulations require projects to disclose their market maker’s identity, legal entity, and contractual terms. They also forbid profit-sharing and guaranteed-return schemes, which the exchange noted could create incentives that conflict with equitable trading practices. Token lending agreements must clearly articulate permissible uses of borrowed tokens.

The guidelines are “designed to assist projects in conducting thorough due diligence on their market-maker associates and to remind users to consider market conditions,” a Binance representative stated in an email. The firm is aiming to promote “a fair and efficient marketplace, and we do not condone misconduct.”

The new policy addresses a segment of the cryptocurrency market that frequently operates behind the scenes. Market makers typically place buy and sell orders to maintain active trading and mitigate sharp price fluctuations, which, in a healthy market, can help users execute purchases or sales without significant slippage, particularly when a token is newly listed.

Binance noted that issues arise when companies behave less like unbiased liquidity providers and more like sellers with undisclosed incentives. The exchange highlighted actions such as sales that conflict with token release schedules, unbalanced trading, and activities that inflate volume without naturally affecting prices.

In the blog announcement, Binance stated it will take “prompt and decisive action against any misconduct,” including blacklisting market makers. It remains uncertain if Binance intends to disclose the identities of the market makers it blacklists.