Cryptocurrency exchanges aren’t doing enough to protect consumers, according to a new report from the New York Attorney General’s office.
Not Enough Surveillance
The 32-page Virtual Markets Integrity Initiative Report was published yesterday. It is seeking to address “transparency, fairness, and security of virtual asset trading platforms.” It makes clear, however, that the report is not addressing whether crypto assets are a sound investment choice.
Published by Barbara Underwood, Attorney General, the report notes that investors have to rely on exchanges. Yet, unlike traditional stock exchanges, crypto platforms are “not registered under state or federal securities or commodities laws.” Underwood added:
Nor have they implemented common standards for security, internal controls, market surveillance protocols, disclosures, or other investor and consumer protections.
As a result, investors face significant risks. This is noted by the fact that hackers have managed to infiltrate various cryptocurrency exchanges to siphon off billions of dollars worth of crypto assets.
In order to better understand the policies and practices of cryptocurrency exchanges, the New York Attorney General’s office launched the Virtual Markets Integrity Initiative in April. This was implemented by former Attorney General Eric Schneiderman. It sent out letters and questionnaires to 13 platforms, of which nine responded. These were: Bitfinex, bitFlyer, Bitstamp, Bittrex, Coinbase, Gemini, itBit, Poloniex, and Tidex. The Attorney General’s office also invited HBUS, a partner of Huobi, to take part, which it did.
Binance, Gate.io, Huobi, and Kraken declined on the basis that they stated they don’t permit trading from New York. Notably, though, they continue to provide services to New Yorkers.
More Needs to Be Done
Even though the report highlights that platforms have revised or improved various “policies of interest,” it goes on to state that:
Platforms lack robust real-time and historical market surveillance capabilities, like those found in traditional trading venues, to identify and stop suspicious trading patterns.
Not only that, but a low number monitor the operation of bots trading on their platforms. Additionally, trading platforms reportedly lack a “consistent and transparent approach” to auditing the crypto in their possession. Others are alleged not to do any auditing. The report notes:
That makes it difficult or impossible to confirm whether platforms are responsibly holding their customers’ virtual assets as claimed.
Of course, it’s one thing to have an exchange holding a person’s assets, but it’s another when it comes to safeguarding them.
Do you keep your cryptocurrency on exchanges or do you maintain them with your own private keys? Let us know in the comments below.
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