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US financial regulators are preparing to bring order to the undisciplined world of cryptographic exchanges.
After a closer look at some of the largest encryption platforms, the Attorney General of New York yesterday released a long list of concerns. The regulator, based on a voluntary survey of nine exchanges, including Coinbase and Gemini, reported that more rigorous monitoring and enforcement could follow.
The new report says that in many cases, trading platforms fail to protect traders from manipulation and algorithmic trading. According to the voluntary study, they also neglect to ensure that customers' assets are protected from hackers and that sophisticated traders do not enjoy special benefits. These allegations are not necessarily a surprise to anyone in the digital goods sector, but it shows that officials have taken note of these facts. These platforms can be expected to provide safeguards similar to traditional exchanges.
Four platforms – Binance, Gate.io, Huobi and Kraken – declined the regulator's request to participate in the investigation as they said they did not allow trade from New York. However, the regulator said, on the basis of its investigation, that it had referred Binance, Gate.io and Kraken to the Financial Services Department for potential breach of New York's virtual currency rules.
Binance CEO Changpeng Zhao, who was speaking at a CoinDesk conference in Singapore, declined to comment on the New York regulator's report. However, he seemed unfazed by the news. he told the conference participants after making a profit of $ 350 million in the first half of the year, the exchange is looking to increase its trade of five to ten fiduciary currencies over the next twelve months, but probably not in North America. He was stormed by fans as he left the scene, prompting the organizers to consider calling security.
Jesse Powell, CEO of Kraken, said earlier that market manipulation did not matter to cryptographic traders and that the notion of manipulation was in fact a euphemism for mind control. The report of the Attorney General of New York was alarming. could not be reached immediately for a comment.
The New York watchdog has also noted conflicts of interest, such as trading between proprietary trading units that buy and sell on the stock exchange's own platform. Regulators have reprimanded and fined companies for similar behavior on the US stock market. In addition, there are no digital asset audit standards, and customers remain "highly exposed" to piracy.
"It's a very interesting read," said Don Wilson, founder of the DRW e-commerce giant, at the CoinDesk Singapore conference. The DRW unit in Cumberland has been marketing crypto for four years. "They make very good points," he said.
Some of the concerns of regulators, such as the vulnerability of hackers to crypto theft, are well known. However, the new report also highlights concerns that "we have long suspected, but there has been a lack of transparency," Wilson said.
Coinbase, for example, revealed that nearly 20% of the volume of its platform came from its own exchanges. When stock exchanges buy and sell heavily on their own platform, this raises questions as to whether the market is as strong as it seems, New York officials said. The trading activity of a stock exchange may also use customer information in its own transactions, which gives the company an added advantage over its customers. Coinbase did not immediately respond to a request for comment.
New trade has proliferated rapidly. A start-up of the CoinDesk conference in Singapore has announced that it will be able to set up a new encryption platform in just six weeks. However, the Attorney General's New York report points out that the rapidly growing era of trade could end.
"Everyone is struggling for disruption, but not everyone has thought about the medium and long-term consequences," said John Lin, CEO of Singapore's high-frequency Grasshopper dealer and founder of Tilde, a company encryption. The industry, he said, must do a better job of self-regulation.
This story was updated in the fifth paragraph with comments from the CEO of Binance.
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