New York Turns Up the Heat on Cryptocurrencies

The state of New York has shown significant interest in cryptocurrency and blockchain, holding public forums to learn more about the technology and examining potential use cases for it in government. That curiosity was on display again this week, as Attorney General Eric Schneiderman announced the Virtual Markets Integrity Initiative, a “fact-finding inquiry” into prominent crypto exchanges.

Schneiderman was quick to point out that was not an investigation, as his office do not suspect any criminal activity on behalf of the selected parties. But he did admit that the initiative was rooted in consumer protection as cryptocurrency gains mainstream recognition. “Consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms,” said Schneiderman. He described the Virtual Markets Integrity Initiative as a way to “[promote] the accountability and transparency…that investors and consumers deserve.”

The inquiry revolves around a questionnaire, broken into eight categories and sent to 13 cryptocurrency exchanges of varying stature (including Coinbase, Kraken, Binance, and Huobi). It asks general questions about the business operations for the exchanges – proof of identity procedures, safeguards against market manipulation, fee breakdowns, protections against money laundering, and more.  

Cryptocurrency investors, gun shy from recent regulatory inquiries around the world, may perceive the inquiry as a threat, but Schneiderman’s office has reiterated that the questionnaire is aimed at gathering facts about potential consumer headaches (in line with Schneiderman’s long tradition of defending consumer rights for New Yorkers) – and is not an indicator of potential regulatory action. The exchanges themselves have been receptive to the review – Gemini CEO Tyler Winklevoss issued a statement approving of the questionnaire, adding that Gemini “[continues] to embrace thoughtful regulation and collaboration on our mission to help build the future of money.”

While it is unclear what the inquiry will reveal, it seems that a more fair, transparent cryptocurrency market will benefit exchanges, consumers, and regulators alike – and allow cryptocurrency to continue its journey into the mainstream.

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