Kraken CEO Reaffirms Schneiderman Snub Despite N.Y. Registration
(Bloomberg) -- Kraken, one of the longest-running cryptocurrency exchanges, said its New York registration as a money-services business won’t affect its decision to ignore a request from the state’s top lawyer for detailed information about its operations.
Attorney General Eric Schneiderman said Tuesday that he sent letters to Kraken and a dozen other crypto exchanges seeking information on their internal controls and how they protect customers. The“fact-finding inquiry” is part of his Virtual Markets Integrity Initiative, a program intended to “increase transparency and accountability” on platforms used to trade digital currencies and inform regulators, investors and consumers, he said. Kraken Chief Executive Officer Jesse Powell dismissed the request Wednesday in a tweet.
The San-Francisco-based company is registered as a money services business in almost every state, according to the U.S. Treasury Department’s Financial Crimes database. Powell, in response to questions from Bloomberg, said it doesn’t matter that one of them is New York.
Registering as an MSB with Treasury “and ticking the box for all the states (including New York) years ago does not mean that we’re actually operating in New York,” Powell said Thursday in an email. “MSB is a registration, not a license, and it’s done at the federal level, not the state level. It does not expose us to New York state’s jurisdiction.”
Amy Spitalnick, a spokeswoman for Schneiderman, fired back.
“Legitimate entities generally like to demonstrate to their investors that their money will be protected," she said in a statement Friday. “This is very basic information that any credible platform should have on hand and be willing to share with their investors.”
Regulators worldwide are increasingly scrutinizing cryptocurrencies as the venues on which they trade 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. Bittrex and itBit, which also received letters, said earlier this week that they supported the attorney general’s efforts. Kraken chose another path.
“Somebody has to say what everybody’s actually thinking about the NYAG’s inquiry,” Powell said in his twitter post. “The placative kowtowing toward this kind of abuse sends the message that it’s OK. It’s not OK. It’s insulting.”
In 2015, New York’s Department of Financial Services created a “BitLicense,” a special permit that would apply to virtual currency exchanges, which drew criticism from Bitcoin companies for being too burdensome. The move prompted Kraken to cease operating in the state that same year, according to Powell.
“We made the wise decision to get the hell out of New York three years ago,” he said in the statement. “Good luck, New Yorkers.”
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