Coinbase claps back at the NY AG report, asserts on customer safety

The aftermath of the report released by the New York Office of the Attorney General is still creating tremors in the cryptocurrency space. Coinbase, one of the biggest cryptocurrency exchanges in the FinTech ecosystem, responded to the allegations mentioned in the report, saying that the allegations were misplaced.

The report titled ‘Virtual Markets Integrity Initiative’ stated that Coinbase was involved in over 20% of the executed volume on their exchange. The report aimed at creating awareness amongst the user base about the high level of “proprietary trading” that occurred on the platform as well as the repercussion they might face in the future.

The report stated:

“As a general principle, 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.”

Mike Lempres, the Chief Policy Officer at Coinbase, retaliated to the comments in the report. In a Medium blog post titled ‘Correcting the record’, the official affirmed on the fact that it does all trades on behalf of Coinbase Consumer customers.

He also stated that some figures were misrepresented in the report, citing the example of ‘”self-trading”. The company has gone on record and stated that the company only cites figures that are given by the customers and does not indulge in actions that would sway the market in any way.

Lempres also said:

“Our goal is to be the world’s most trusted place to buy, store and interact with cryptocurrency. We welcome oversight and will continue to work with regulators to promote the cryptocurrency ecosystem.”

One of the main concerns highlighted in the report by the NYAG pointed to insider trading and the scenario that a lot of the investors and traders partake in it to ensure the continuous rise of currencies. The report also stated:

“…potentially using non-public information to inform their trades. Fourth, apart from individual employee trading, several trading platforms themselves trade on their own venue in a proprietary capacity.”

Coinbase is not the only cryptocurrency which was called out by the Attorney General, with the list also including exchanges like Bitfinex, bitFlyer, Poloniex, and Tidex. The Office of the Attorney General also elucidated on the policies that cryptocurrency exchanges need to follow which “define, detect, prevent, or penalize suspicious trading activity or market manipulation.” This was followed up by clauses that focussed on prevention of mismanagement of assets during trade on any cryptocurrency exchange.

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