Coinbase, Kraken Respond to NY Virtual Markets Integrity Report 🚨 This article is 6 years old...
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Coinbase, Kraken Respond to NY Virtual Markets Integrity Report
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Updated: Mar. 20, 2022 at 4:08 pm UTC
Photo by Kai Pilger on Unsplash
Earlier this week, the New York Attorney General’s office released a report on the state of the cryptocurrency marketplace in the state, called the New York Virtual Markets Integrity Report. The report took a look at how several cryptocurrency trading platforms operated and what measures they had in place to protect consumers’ investments.
‘These Platforms Vary Significantly in Their Operations’
Per the report, the Attorney General’s (AG) office sent letters to several platforms asking to voluntarily identify their operating methods. According to New York Attorney General Barbara D. Underwood, the findings revealed that “these platforms vary significantly in their operations, internal controls and safeguard to protect consumer assets.”
Earlier this year, we sent letters to major cryptocurrency trading platforms requesting key information on how they operate.
Today, we are releasing the results of that inquiry. Read our report: https://t.co/s4gcqEwvB8 pic.twitter.com/XhhHEqWOBY
— NY AG Underwood (@NewYorkStateAG) September 18, 2018
Underwood claimed in a series of tweets released alongside the full report that her office found three main areas of concern: Few platforms are doing enough to stop what she called “abusive trading” by bots or algorithmic programs; conflicts of interest; and customers have limited insurance for their funds.
According to Underwood:
“Generally accepted methods for auditing virtual assets do not exist, and trading platforms lack a consistent and transparent approach to independently auditing the virtual currency that is purportedly in their possession. Some platforms do not insure against losses at all.”
Crypto Groups and Trading Platforms Push Back
The New York AG’s office sent letters to 13 crypto platforms to gather data for their report. Four of them–Binance, Kraken, Gate.io and Huobi-declined to take part in the report, which prompted an investigation into whether they fell under New York’s jurisdiction regarding cryptocurrency laws, and if they were, whether they were in violation of those laws.
With the release of the report, some of the companies that took part, as well as some that declined, are publishing responses of their own, correcting what, in some cases, they deem incorrect representations of their practices.
In a post, entitled “Correcting the Record: Coinbase Does Not Engage in Proprietary Trading,” Mike Lempres, Coinbase’s chief policy officer, states that while his company is grateful to the NY AG’s office for “shining a spotlight in important compliance issues,” they saw some aspects of the report as incorrect. He writes:
“The report states: ‘Coinbase disclosed that almost 20 percent of executed volume on its platform was attributable to its own trading.’ Coinbase does not trade for the benefit of the company on a proprietary basis. In order to provide an easy-to-use customer experience, Coinbase Consumer quotes a price and then quickly fills the order from our exchange platform (Coinbase Markets). This takes advantage of the liquidity provided by the entire Coinbase ecosystem.”
Trading platform Kraken, which also declined to answer the questionnaire, chimed in on Twitter that it did so because it doesn’t have any clients in the state of New York.
Thanks to the NY taxpayer for funding this research — saved our Product team a lot of time, and we got some interesting non-public info on our competitors. Excellent overview of issues, and a nice list of 'Questions Customers Should Ask' on pg 32. https://t.co/S5XxopBEyC
— Kraken Exchange (@krakenfx) September 19, 2018
Kraken did, however, follow up with an objection, stating:
We must, however, object to the highly unprofessional/malicious implication that because we did not respond to the voluntary information request, we *might* be operating illegally. We told you we don't operate in NY. AG trying cases in court of public opinion now?
— Kraken Exchange (@krakenfx) September 19, 2018
Underwood says she has referred Binance, Gate.io and Kraken to the NY State Department of Financial Services for possibly operating unlawfully in New York.
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Coinbase
Coinbase is a digital currency exchange and wallet service that allows individuals to buy, sell, and store digital currencies, such as Bitcoin, Ethereum, and Litecoin.
Binance
Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies.
HTX
Huobi, a virtual asset exchange, launched a revised branding strategy on September 13, 2023, where “Huobi” will be rebranded as “HTX.” “H” stands for Huobi, “T” represents TRON with a commitment to being all in TRON, and “X” stands for the exchange.