NY Attorney Genernal Launches Inquiry in Crypto Exchanges

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by Bhushan Akolkar · 3 min read
NY Attorney Genernal Launches Inquiry in Crypto Exchanges
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The fact-finding inquiry into the practices of crypto exchanges is intended to ensure all mandatory procedures of registration are being followed with transparency.

Amidst the growing regulatory concerns across the United States, Attorney General Eric Schneiderman for the State of New York is having a closer look at the operations of a few crypto exchanges thereby ensuring more transparency in the overall process.

On Tuesday, Attorney General Eric Schneiderman wrote a letter to 13 crypto exchanges announcing the “Virtual Market Integrity Initiative” saying that it was a “fact-finding inquiry into the policies and practices” of the digital currency trading platforms. In this letter, the Attorney General seeks for information regarding their “operations, use of bots, conflicts of interests, outages, and other key issues.”

The important basis of this new Virtual Market Integrity Initiative is the push for higher transparency to protect and preserve investor’s rights in this nascent financial markets. Schneiderman said:

“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.”

Schneiderman noted that the major effort would be to look into digital currency exchanges that operate out of New York due to regulatory concerns. The announcement read:

“We are aware that certain trading platforms have formal rules barring access in New York and may not have a license to engage in virtual currency business activity in New York. Among other topics, we are asking platforms to describe their measures for restricting trading from prohibited jurisdictions.”

In his letter Schneiderman also mentions that even though cryptocurrencies have provided an alternative approach to financial transactions with advanced blockchain-based technology solutions, their probable use for illicit activities needs to be kept in check. He said:

“Representing a technological advance, a medium of exchange, and an investment opportunity all at once, virtual currencies are inspiring innovators, entrepreneurs, and investors—and are fueling an increasingly diverse ecosystem of companies and applications.”

He further added:

“But virtual currency is also a highly speculative sector, featuring significant volatility, instability, and risk. Moreover, published reports indicate the sector has attracted fraudsters, market manipulators, and thieves.”

The list of 13 crypto exchanges that have received the letter includes GDAX, Gemini, bitFlyer, Binance, itBit, Gate.io, Huobi.Pro, Bitfinex, Bitstamp, Bittrex, Kraken, Tidex and Poloniex.

Each letter comprises of a 34-point questionnaire which the exchanges have been asked to complete by filling all necessary details and submit before May 1st. Some of the questions are quite detailed probing deep into the operational policies of the exchange and other procedures related to trading, KYC/AML practices, information on banking relationships and insurance. In order to ensure transparency with customers, the AG’s office will publish this information “in a publicly accessible format.”

No wonder that New York is said to have one of the most precise and strict rules for exchange operators, who are required to have a mandatory “BitLicense” from the state’s Department of Financial Services (NYDFS) in order to continue their business.

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