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Coinbase, Kraken Respond to NY Virtual Markets Integrity Report

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.”

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

Related: Binance, Kraken, Gate.io Referred to DFS by NY Attorney General for Potential Regulation Violation

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.

Kraken did, however, follow up with an objection, stating:

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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