Cryptocurrency focused report released by NY AG; action taken against infringements

On 18th September, the Attorney General of New York released a report titled ‘Virtual markets Integrity Initiative Report’. The report, authored by Barbara D. Underwood, has created ripples in the cryptocurrency community by calling out digital exchanges and their fraudulent activities after conducting inquiries into their workings.

The first part of the report talked about the “Jurisdiction, Acceptance of currencies and fees”. The exchanges that came under the umbrella of the investigation are Bitfinex, bitFlyer, Bitstamp, Bittrex, Coinbase, Gemini, HBUS, itBit, Poloniex, and TIDEX.

The subsection of the report touched upon how exchanges need to adhere to certain principles and directives suggested by the Office of the Attorney General [OAG].

Some of the information that the exchanges need to divulge includes:

The geographical location of the base of operations, ie. The location of incorporation and the headquarters: This clause, according to the OAG, is mainly targeted at companies that have offshore branches. This allows the Office to monitor these branches after a string of companies had defected to other countries, thereby taking the power to act away from the OAG when shady activities are committed.

Four exchanges –Huobi, Binance,, and Kraken– refused to respond to the survey conducted by the OAG. Coincidentally, these four exchanges have bases outside the United States.

The ambit of jurisdictions under which customers can trade on the exchange: The OAG watches over what currencies are chosen by the exchanges for trading, which can be U.S Dollar, Euros or any other fiat currency. Exchanges also need to notify the Office about the different type of cryptocurrencies that they trade in, for example, Bitcoin, Ethereum, XRP etc.

The other factor that the Office checked during the survey was the various safeguards put in place that makes transactions safer and scam-free. Methods such as Know Your Customer [KYC] approvals and identity verifications were the standards basis for the survey.

The amount of fees associated with maintaining an account and the trading parameters: This clause gives the OAG the authority to look into the fee architecture followed by the exchanges. Most exchanges charge customers on a pay per transaction model as well as several other sub charges that follow up after trades.

The Attorney General has gone ahead and stated that the survey on these factors was conducted keeping in mind customers who trade in digital assets. This includes details that surround the interchange of fiat currency and the full disclosure of all transaction details. This was especially noted in lieu of masqueraded fees that trip up users.

The Office of the Attorney General has also explicitly given a statement that targets the four exchanges that refused to respond to the survey. It said:

“Customers should understand that the four trading platforms that refused to participate in the OAG’s Initiative may not make their full schedule of fees available publicly, and that certain customers may receive preferential rates. Further, customers should be aware that those venues may not disclose certain fees in advance, and customers could find that transacting on those venues is more expensive than anticipated.”

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