In a publication that the state of New York made available today, New York Attorney General T. Schneiderman announced the launch of a fact-finding inquiry into relevant digital currency exchanges. The state seeks response from 13 prominent exchange companies, including Coinbase, Binance, and Kraken.
Titled the Virtual Markets Integrity Initiative, this new inquiry purportedly looks to “improve transparency and accountability” of major digital currency trading platforms in a bid to protect investors.
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“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 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.”This fact-finding inquiry looks to develop the state’s understanding on the practices of digital currency exchanges. The Attorney General’s office stated that the move is part of a broader effort to protect investors. “Ensuring that enforcement agencies, investors, and consumers have the information they need to understand the practices and the risks on these platforms is critical,” it added, citing reports of theft, sudden trading outages, and possible market manipulation conducted by fraudulent actors operating in the space.
The inquiry does not, by its nature, call into account the integrity of any of these platforms. Rather, it merely looks to further the state’s understanding of the industry amidst a time when regulation is becoming increasingly important. The 13 exchanges listed as recipients of the enquiry are GDAX, Gemini, bitFlyer, Bitfinex, Bitstamp, Kraken, Bittrex, Poloniex, Binance, Tidex, itBit, Gate.io, and Huobi.ProAnyone can view the questionnaire sent to these exchanges. It begins with basic introductory questions and proceeds to cover a wide variety of topics like money laundering, internal controls, and how these exchanges aim to protect the funds of their users. “Describe the precautions you have in place to safeguard the Fiat Currency, Virtual Currency, or financial instruments in your custody,” question 29 asked. It is currently unclear how exchanges will comply with the inquiry, as many operate overseas. Regardless, it demonstrates an intent for regulators to better understand the industry’s circumstances.
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