Leading cryptocurrency exchanges are on the government’s radar on suspicion of violating existing laws in New York State. Binance, Kraken, and Gate.io are among the exchanges that are accused of operating from “fake” or non-existent headquarters.
AG Underwood Blasts Cryptocurrency Exchanges
The report published on Tuesday by New York Attorney General is the aftermath of the Virtual Markets Integrity Initiative launched by the State in April this year where 13 platforms were asked to freely share information about their practices, internal control mechanisms and how they were safeguarding themselves against fraud and market manipulation. However, four exchanges -Binance, Kraken, and Gate.io did not comply with the request on grounds they never allowed trading from New York.
The AG’s study revealed that most online platforms where people buy and sell digital currencies like Bitcoin were operating on a lower security pedestal in comparison with the traditional banking markets and is therefore exposed to market manipulation that puts customers’ funds at risk. Attorney General Barbara Underwood states:
“As our report details, many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges.”
Following the expose, the Attorney General’s office has recommended that New York’s Department of Financial Services determines whether the exchanges that failed to comply are operating within the existing laws.
The Virtual Markets Integrity Initiative report unearthed at least three areas of serious concern within the cryptocurrency market. The AG pointed out that most exchanges haven’t implemented initiatives to identify and stop abusive trading practices.
Key Concerns Identified
The Virtual Markets Integrity Initiative report also identified three broad areas of concern in the crypto markets. First, the AG said many platforms have yet to implement efforts to monitor and stop abusive trading practices while others conducted overlapping lines of business presenting “serious conflict of interest; ”–trading their own accounts on their own platforms or issuing their personal digital currencies or receiving payment from the companies for listing their personal tokens.
Most seriously though, the study says cryptocurrency exchanges don’t have sufficient parameters for protecting customer funds and they lack acceptable methods for auditing cryptocurrencies. Even though some exchanges supervise their markets for trading abuses, several others have failed in that area. The newly appointed AG says in the report:
“New Yorkers deserve basic transparency and accountability when they invest–whether on the New York Stock Exchange or on a cryptocurrency platform. Yet, as our report details, many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges.”
