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New York AG launches investigation of cryptocurrency exchanges

Andrew Munro 18 April 2018 NEWS

It's just a fact-finding mission, but the results will be publicly disclosed.

On 17 April New York Attorney General Eric T. Schneiderman launched the Virtual Markets Integrity Initiative.

The move is a fact-finding enquiry into the policies and practices of cryptocurrency exchanges, and a broader effort to bring more consumer protection to the industry. As part of its initial efforts, the New York Attorney General's office sent letters to 13 major exchanges, requesting key insights on their operations, internal controls and safeguards used to protect customer holdings.

"As the letters explain, the Initiative seeks to increase transparency and accountability as it relates to the platforms retail investors rely on to trade virtual currency, and better inform enforcement agencies, investors and consumers," the press release reads.



So far it's just a fact-finding mission to better inform subsequent changes.

"With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don't have the basic facts they need to assess the fairness, integrity, and security of these trading platforms," said Attorney General Schneiderman. "Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve."

The move may be related to the recent introduction of the New York Cryptocurrency Exchange Act bill, which is focused on bringing cryptocurrency exchanges in line with state regulations, while doing away with some of the more onerous existing regulatory requirements.

New York has previously been something of a dead zone for some cryptocurrency exchanges, as they were forced to work in line with expensive licensing requirements, which often just wasn't worth the cost.

The thirteen exchanges that received the letters were:

  • Coinbase/GDAX
  • Gemini
  • bitFlyer
  • iFinex (Bitfinex)
  • Bitstamp
  • Kraken
  • Bittrex
  • Circle/Poloniex
  • Binance
  • Elite Way Developments (Tidex.com)
  • Gate.io
  • itBit
  • Huobi

All of them were asked to complete the detailed survey found here (PDF).

Many of the questions focused on basic operating elements, including the fiat and cryptocurrencies they trade, the countries from which each exchange accepts customers and the complete fees charged for everything from conversions to transactions to withdrawals.

Many of the remainder are focused on the steps taken to protect customer funds. More than a third of all cryptocurrency exchanges have been hacked at some point, and more than a billion dollars of customer funds have gone missing to date, so the risk is very real.

The detailed questionnaire might be an onerous process for many exchanges, but one worth doing correctly. The Attorney General's office warns that the responses will be reviewed and assessed, and compared with other platforms. The exchanges which fail to provide complete information will be publicly identified, warns the letter.

The deadline for exchanges is 1 May, and the detail required might lead to some late nights and frustrations among the exchanges. Those that already have detailed written guidelines for each of the questions, as most legitimate ones probably should, will likely find the process a lot easier. In this way, fact-finding missions and the public disclosure of findings can be enough to spur change by itself.


Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, XRB

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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