New York State Attorney General Takes Aim at Crypto Exchanges

It’s no secret that regulators have had some major concerns about cryptocurrencies. From concerns over hacks and scams to suggestions that the anonymity some currencies provide make them all-too-convenient for criminals, there’s been no shortage of bad press facing the crypto market. The latest lash comes from the New York State Attorney General who’s taking cryptocurrency exchanges to task for not doing more to protect consumers.

As Mashable writes, a new report from the State Attorney General looks at more than a dozen exchanges and details how they fail to prevent fraud and other issues on their platforms. The report was compiled by sending inquiries to 13 exchanges — nine of which voluntarily submitted their responses. Some of those that participated in the AG study were major exchanges such as Coinbase and Bitfinex, while those that opted-out were Huobi Global Limited, Binance Limited, Kraken, and

In the report, the office of Attorney General Barbara Underwood wrote, “[Virtual] asset trading platforms now in operation have not registered under state or federal securities or commodities laws. Nor have they implemented common standards for security, internal controls, market surveillance protocols, disclosures, or other investor and consumer protections. Accordingly, customers of virtual asset trading platforms face significant risks.” Likely not by coincidence, Underwood’s office went on to tweet that three of four exchanges that did not participate in the report may be operating illegally, writing, “Based on the results of our report, we have also referred three platforms – Binance, , and Kraken – to the New York State Department of Financial Services for possibly operating unlawfully in New York.”

Among the issues that the AG report dove into concerned market manipulation and insider trading. Adding fuel to these accusations was the fact that many exchanges trade currency on their own platforms. In fact the report found that one-fifth of the trades made on Coinbase come from the company themselves (this information was voluntarily submitted from Coinbase). This led the report author to write, “[When] a significant percentage of the volume in one or more assets on a venue is attributable to one source, customers face the risk that the availability of liquidity in those assets could change, without notice and at any time, including when liquidity is needed most — namely, in times of market volatility or rapid price movement.” They went on to note that, “Generally accepted methods for auditing virtual assets do not exist.” This would suggest that exchanges are extremely vulnerable to price manipulation via bots and other means, which could serve to harm individual investors and users.

Interestingly this cryptocurrency exchange report from New York’s Attorney General arrives the same week that another New York regulator made headlines after suing the Office of the Comptroller of the Currency in a bid to halt the agency from issuing national bank charters to FinTech firms. Despite the fact that legal action is far more impactful than a voluntary report, the latter actually has the potential to be more damning to the vertical in question. With the crypto market already slumping and bad news seemingly mounting all the time, there’s no scenario where this AG report proves helpful to those hoping for a greater expansion of cryptocurrency. All of that said, while an evolution of the crypto market (at least the mainstream one, that is) seems all but inevitable at this point, it would be foolish to think that this is the end of cryptocurrencies despite what some might be saying.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

Other Articles by Jonathan Dyer

Marqeta Expands Credit Program with New APIs and More

A FinTech that specializes in creating credit card experiences is rolling out some new features. This week, Marqeta announced what it calls a "significant expansion" of its credit platform. This includes more than 40 new credit APIs that will further help clients craft and launch their own credit card products. Additionally, the company notes an updated intuitive dashboard. Using this platform, businesses can create unique card options that can not...

PayPal Launches Small Business Credit Card with Flat 2% Cashback

The popular platform PayPal is rolling out a new product built specifically for small businesses. Today, the FinTech announced the launch of The PayPal Business Cashback Mastercard. The new card will be issued by WebBank and marks the first time PayPal has offered a business credit card. With the PayPal Business Cashback card, business owners will be able to earn 2% cashback on all purchases. This earning rate is not...

Wells Fargo Unveils New Autograph Rewards Visa Card

A new rewards credit card is on the way from Wells Fargo. Today, the bank introduced its Autograph card, which expands the company's refreshed card portfolio. In terms of rewards, the Wells Fargo Autograph Card will earn 3 points per dollar spent in a number of categories. These include restaurants, travel and transit, gas stations, select streaming services, and phone plans. All other purchases will earn 1x points. Beyond the...