New York Attorney General Eric Schneiderman has launched an inquiry into the policies and practices of 13 cryptocurrency exchanges, with his office sending letters to Coinbase, Bitfinex, Bitstamp, Payward, Gemini, Kraken, bitflyer, ifinex, Bittrex, Poloniex, Binance, Tidex, Gate.io, itbit, and Huobi asking the exchanges to complete a questionnaire [PDF].
Among the questions asked are: Who owns more than 5 percent of the entity; the policies and procedures regarding moving value between wallets and virtual and fiat currencies; the policies and procedures for margin trading and the use of bots; when the exchange locks in a price; and whether the exchange has any safeguards in place to prevent suspicious trading activity or market manipulation.
The AG office also asked if the exchanges have any restrictions to prevent directors, employees, or affiliates from trading on the exchange in question or elsewhere; to describe the scope, frequency, and methodology for any audits conducting on the platform; whether the exchange has a capital buffer to respond to volatility, outages, and other contingencies; and what insurance an exchange has.
In a statement, the AG office said bitcoin exchanges often lack protections.
“The extent of disclosures to customers about trading rules, internal controls, and other basic practices varies from platform to platform, making it difficult or impossible for prospective users to evaluate the actual risks of trading on a particular platform,” the office said.
Schneiderman said the probe would promote accountability and transparency in virtual currency markets.
“With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms,” he said.
Earlier this week, Coinbase acquired Earn.com, makers of a paid email product that lets people earn bitcoin for replying to emails or completing surveys. The value of the transaction was not disclosed.
Since the start of the year, platforms have been banning cryptocurrency ads, typically citing the high percentage of scams found in the space. Twitter and Google announced bans in March, while Facebook led off in January with its ban.
Last week, it was revealed that Indian cryptocurrency exchange Coinsecure was accusing its chief strategy officer of making off with 438 bitcoins.
Earlier this month, South Korean prosecutors arrested the CEO of the Coinnest exchange for fraud and embezzlement, with prosecutors accusing the executives of siphoning funds out of customer accounts into their own.