New York Attorney General Launches Crypto Market Inquiry

Exchanges, Law and Regulation, News

New York’s attorney general, Eric Schneiderman, launched an inquiry into crypto markets on Tuesday. The initiative aims to protect consumers who, according to Schneiderman, often lack the “basic facts” about how these trading platforms operate.

On April 17, 2018, New York announced the Virtual Markets Integrity Initiative — an inquiry that seeks to make the operations and conflicts of interest of crypto exchanges more transparent. The initiative is described by the attorney general’s office as a fact-finding inquiry into the policies and practices of platforms that consumers use to trade virtual currencies.

The move reflects the worldwide consensus that the lack of regulation and understanding of cryptocurrencies pose a risk to investors, especially as digital currency is on the rise, making it an attractive area for market manipulators, scammers, and other bad actors.

The Virtual Markets Integrity Initiative has sent a questionnaire to leading exchanges

A press release published on the NYC’s Attorney General website confirms that the Investor Protection Bureau has sent letters to 13 top exchanges including Coinbase, Bittrex, Kraken, and Bitfinex. The letters include a questionnaire asking companies to explain how their exchanges are operated and what measures are enforced to protect consumers.

The document asks exchanges to provide details regarding the ownership and control of their platforms, basic operations and fees, and a copy of their current terms and conditions. The questionnaire also asks exchanges to list all the categories of information they require from a customer before allowing them to trade on the platform (in accordance with AML regulations) and to describe what measures are taken by companies to protect customer funds from potential risks.

A familiar story

Calls for the regulation of crypto exchanges are nothing new, but there does seem to be an increasing trend around the world to encourage transparency in how these platforms operate. Agencies like the Japanese FSA have stepped in to try and repair the damage done by high-profile hacks, and exchanges are having to adapt or lose key markets. As the authorities increase pressure on exchanges, we should see this damage begin to heal as the exchanges that do the most to protect consumers thrive, and others either improve or become irrelevant.

Transparency won’t necessarily mean that all investors will have the “basic facts” about the exchanges. To be informed, they will still need to scrutinize the platforms they use, (and most crypto enthusiasts are diligent enough to do this), but there will always be those who don’t bother. These investors are no less vocal when they get burned and contribute greatly to the spread of FUD. Increased pressure for exchanges to meet better standards should make life harder for bad actors and platforms that aren’t doing enough to protect their customers. If this is the case, then most investors would welcome similar action.

Michael is an English and Creative writing graduate of Liverpool John Moore’s University, a former editor of several magazines, and a crypto-currency enthusiast. He is mostly interested in crypto-legislation and the potential of decentralized technology to change the world.

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