Leaving aside the incessant scams and hacks that characterize the cryptocurrency world, the attorney general of the state of New York has said that crypto exchanges themselves are not helping customers. According to him, even those places where prospective investors are supposed to sell or buy cryptos such as Ether and Bitcoin are not well protected. The attorney’s backlash on cryptos is contained in a report that emanated from his recently.
A Closer Look at the Matter
Based on today’s release, when 13 exchanges were critically analyzed, it became obvious that the attorney’s allegation may not be untrue after all. There were a number of failures on the part of the exchangers in protecting their investors against manipulation, abuse, and fraud. The revelation was pitiable and plainly awful. The report reads in part:
[Virtual] asset platforms now in operation have not registered under state or federal securities or commodities laws… They have not [even] 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.
Expectedly, the risks mentioned in that report are different for each person and can have far-reaching consequences too. Obviously, the vulnerability of these exchanges to risks is not limited to the small cryptos alone; even the renowned ones have the risks too.
In arriving at the report’s summation, the attorney general of New York sent 13 exchanges some voluntary questionnaires. Out of these, only 9 thought it expedient to respond. And these nine which include Kraken, Bitfinex, Gemini Trust Company, Coinbase, Binance Limited, Huobi Global Limited, and Gate.io practically asked the attorney to mind his business.
As posted on the New York’s AG Twitter account page, some three exchanges namely Gate.io, Binance, and Kraken have been referred to the Department of Financial Services in New York. The AG alleged that there are indications to affirm that these platforms are operating unlawfully in the state.
What the Report Looked At
For each of the exchanges, the report aimed at determining the possibility of insider trading as well as market manipulation. That is aside from the algorithmic and automated trading that is currently ravaging. Unfortunately, the report found out that most companies transact cryptos on their exchanges. This is possibly an effort on their parts to sustain liquidity.
For instance, Coinbase confirmed that it owns up to 20% of its executed volume. According to the report, the danger in this trend is that liquidity availability can change at any time without customers being aware. That’s because the majority of the asset is owned by one source. And if such drastic changes occur at a very critical time in the market, the customers can be adversely affected.