Three cryptocurrency exchanges (Binance, Kraken, and Gate.io) are under suspicion of operating illegally within New York, according to the state’s legal chief.
The office of Attorney General, Barbara Underwood, referred all three exchanges to the New York department of financial services for possibly violating digital currency regulations. The exchanges apparently neglected to provide information requested from the state regarding details of their operations, internal controls, and safeguards against market manipulations and fraud.
“New Yorkers deserve basic transparency and accountability when they invest – whether on the New York Stock Exchange or on a cryptocurrency platform,”
– Underwood said.
In the past 6 months, 13 major cryptocurrency exchanges have been approached by the Attorney General for similar details on their operations and safety protocols. Only 9 responded with the information, while the remaining 4 claimed they did not allow trading in New York.
Lack of transparency and accountability continues to derail Bitcoin ETF
For regulators, the lack of information about internal controls and safeguards against market manipulation and fraud has been a major factor influencing their decision to reject all previous ETF applications. There is a clear disconnect between the financial regulatory bodies that operate under centralized governments and the exchanges that trade decentralized assets where autonomy and privacy are considered positive traits.
Both sides need to find a healthy middle ground where information can be disclosed to US regulators without putting the exchanges or their users’ privacy and autonomy at risk. On the other hand, Binance, Kraken, and Gate.io are established exchanges that are already generating significant revenue without the US markets. According to Coinmarketcap, Binance is the world’s largest crypto exchange by trading volume, while Kraken is ranked #14 and Gate.io is #27.
It’s possible that there may not be enough of an incentive to work with the office of the Attorney General; especially since US users can just easily access any of these exchanges whether or not they are legally operating in the US.
Be more cooperative like Coinbase and Gemini
The level of cooperation amongst crypto exchanges will depend entirely on their ambitions for expansion, and the sentiment of their users. Binance, Kraken, and Gate.io may be doing very well today, but if they want to capture the institutional investor market that Coinbase and Gemini are going after, there needs to be more transparency and cooperation with US regulators. In addition, if enough users on these exchanges complain about manipulation or security breaches and start filing lawsuits, this would give regulators all the ammunition they need to come after the exchanges through international courts.
Ultimately, either the risk of combating US regulators or the rewards of attracting institutional traders will determine the level of compliance we see from these leading cryptocurrency exchanges in the coming months and years.
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Source: Crypto Potato