Cryptocurrency Exchanges Get `Fact-Finding' Letter From N.Y.
(Bloomberg) -- New York Attorney General Eric Schneiderman asked 13 cryptocurrency exchanges for detailed information about their operations as part of a "fact-finding inquiry."
Schneiderman said in a statement Tuesday that he sent letters to the exchanges seeking information on their internal controls and how they protect customer assets. The inquiry is part of an effort called the Virtual Markets Integrity Initiative, a program he says is intended to "increase transparency and accountability" on platforms used to trade cryptocurrencies and inform enforcement agencies, investors and consumers.
The letters, sent to platforms including Coinbase Inc., Gemini Trust Co. and bitFlyer USA Inc., come as regulators around the world are increasingly scrutinizing cryptocurrencies. The platforms often lack basic protections of traditional investing platforms and disclosures of rules and practices vary widely, making it difficult for investors to evaluate risk, Schneiderman said.
“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," Schneiderman said. "Yet, too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platform."
In February, New York’s financial regulator, the Department of Financial Services, released guidelines that require virtual currency exchanges to have comprehensive policies to identify, stop and report fraud, such as market manipulation.
Charles Cascarilla, chief executive officer of New York-based itBit, one of the exchanges that received a letter, said Schneiderman wants to ensure the right level of protection for users given the differences in platforms and how they’re regulated. ItBit is a trust company organized under the state’s banking laws, which means they have regulatory examinations, filings and capital, he said.
"Our regulation is a lot like any other bank," Cascarilla said. "Those protections in terms of customer safety, keeping of their assets, if they move assets on the exchange and making sure that you set up the exchange so that everyone is getting a transparent price, that’s not in place in other institutions, so I understand why they want to dig into this and figure out what’s going on."
Another exchange that received a letter, Seattle-based Bittrex, said it looks forward to working with Schneiderman to improve "transparency, accountability and security" at all virtual currency trading platforms.
“Bittrex supports building a secure, fully-compliant environment for blockchain that encourages innovation, economic growth, and U.S. leadership in the industry,” the company said. “That is why we are proactively engaged in discussions with regulators regarding how this may be accomplished with thoughtful policy making.”
BitFlyer said it’s reviewing the request from the New York attorney general.
“Since we launched in the US, we’ve worked quite closely with regulators to help bring legitimacy to the industry." bitFlyer USA’s Director of Compliance Hailey Lennon said in an email. "Transparency is important for consumer protection in this industry.”
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