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A number of cryptocurrency exchanges have no basic consumer protection and are vulnerable to the exploitation of market manipulators, said Tuesday the New York Attorney General's office.
The report, the result of a multi-month survey, found that many stock exchanges lack appropriate collateral, putting consumers at risk. In addition, the Attorney General's office referred three exchanges to New York's Financial Services Department for operating illegally in New York.
"Many virtual currency platforms do not have the policies and procedures necessary to ensure the fairness, integrity and security of their exchanges," said Attorney General of State Barbara Underwood in a statement.
Former Attorney General of New York, Eric Schneiderman, launched the Virtual Market Integrity Initiative Program in April and requested information from a number of specialized exchanges in bitcoins and other cryptocurrencies. Ten exchanges responded to requests for information and four did not respond, arguing that they were not active in the state. The Attorney General's office, however, concluded that three of these exchanges (Kraken, Binance and Gate.io) permitted the exchange of products with New York customers.
These three exchanges could not be immediately reached for comment.
Cryptocurrency bitcoin has a problem as old as money itself – theft. And this gives rise to a new profession: Bitcoin detectives like Kim Nilsson, victim of the huge Mt. Gox exchange the hack. Photo Illustration: Heidi Gelover / The Wall Street Journal
"The Attorney General's report highlights the value of strong state regulation and consumer protection," said Maria Vullo, Superintendent of the State Financial Services Department. "We look forward to reviewing the information and references provided by the Attorney General."
Bitcoin was launched in 2009 in the form of electronic money that can be exchanged without government or banking supervision. In the years that followed, a global market grew around it and hundreds of other crypto – currencies came into being.
The question of market integrity has become one of the main problems surrounding the development of cryptocurrencies. The Commodity Futures Trading Commission of the United States is investigating possible market manipulation, as is the US Department of Justice. The Securities and Exchange Commission has consistently rejected requests for exchange-traded funds based on Bitcoin, concluding that there was not enough transparency to be sure that prices would not be manipulated.
The Attorney General's report draws three main conclusions that validate these concerns. The report concluded that many cryptocurrency platforms had not taken serious steps to monitor and stop tampering, and that few were monitoring or restricting the use of commercial robots.
"Most platforms seem to be aimed at professional and automated traders, with many sites offering special rates and other features to these traders, which puts customers at a disadvantage," the report says.
The report also states that there are "ubiquitous" conflicts of interest between stock exchanges. "Virtual asset trading platforms often operate in multiple business areas that would be tightly or carefully monitored in a traditional trading environment," the report says.
Some platforms work like stock exchanges, brokers, money marketers, proprietary traders who buy and sell for their own accounts, owners of large cryptocurrency banks and even, in some cases, issuers. cryptocurrency. Some exchanges also allow their own employees to hold and trade on their own platforms or on competing platforms.
Finally, the report states that protections for consumer funds "are often limited or illusory". There are no standard methods for auditing virtual assets and platforms do not have consistent and transparent approaches. "This makes it difficult or impossible to confirm if the platforms hold their clients' assets responsibly."
"Customers are heavily exposed to unauthorized hacking or removal," the report says.
The report provides investors with a list of eight questions that trade should be able to answer, including questions about controls to keep abusive traders out of the platform, details about security measures against hackers, details about theft insurance, negotiation of inside information and details on transparency and independent audits.
"Customers would be well advised to avoid platforms that can not satisfactorily answer the question posed in this report," he said.
Write to Paul Vigna at [email protected]
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