Within 48 hours of the release of the New York Virtual Markets Integrity Report issued by New York State Office of the Attorney General (the “OAG”), Coinbase, the cryptocurrency exchange has welcomed the report but has refuted certain findings.
Coinnbase believes the report misrepresents facts
The report, formed after collating details collected from 9 prominent exchanges that operate in the New York region, concluded that several cryptocurrency exchanges it investigated are vulnerable to market manipulation, has drawn a backlash from industry players. On specific comment in the report towards Coinbase was
“Coinbase disclosed that almost 20 per cent of executed volume on its platform was attributable to its own trading.”
This comment has not gone well with Coinbase and In a blog post published, Coinbase’s chief policy officer, Mike Lempres, wrote that the OAG’s assertions in the report have led to a misrepresentation of the exchange’s business in the media.
Replying specifically to the comment, Lempres clarified that Coinbase does not “trade for the benefit of the company on a proprietary basis.” He continued:
“When Coinbase executes these trades, it does so on behalf of Coinbase Consumer customers, not itself.”
Lempres further explained that the 20 percent figure represents consumer-driven volume on Coinbase Consumer, a service that executes users’ orders with its own exchange, as opposed to what was described as “self-trading” in the report
Jesse Powell, the founder of the U.S.-based Kraken exchange, which was named by the OAG as possibly in violation of state law, vented his anger on Twitter, describing the environment in New York generally as “abusive.”
NY is that abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them. #getoverit https://t.co/DC5S1WyRnp
— Jesse Powell (@jespow) September 19, 2018
Erik Voorhees, CEO of ShapeShift to commented on Powell’s tweet saying
And those kinds of people never seem to realize their behavior is what led to the breakup… NY is going to lose its position at the head of global finance if it doesn’t change soon. Keep up the good work @jespow https://t.co/74CVAfivis
— Erik Voorhees (@ErikVoorhees) September 19, 2018
Finding of the reports shocking
The report had also stated leading cryptocurrency exchanges Bitstamp, itBit, and Kraken that help power CME Group Inc.’s Bitcoin futures market. The regulator in its finding has concluded that Bitstamp and itBit, have no formal policies for fighting market manipulation, while Kraken, along with Binance, Gate.io, and Huobi, claimed that they are not operating in New York and hence refused to participate in the attorney general’s review.
Notably, the report said that Binance, Gate.io, and Kraken had been referred to the state’s Department of Financial Services after an investigation into whether those exchanges are operating in New York. A fourth exchange, Huobi, was also investigated but not referred.
The New York State Office of the Attorney General office found that some exchanges could quantify how much trading activity on their platforms came from their own operations. Circle said it was responsible for less than 1 percent of the trading volume on Poloniex while BitFlyer USA conducts roughly 10 percent of the trades on its platform.
The report also noted that while most exchanges use know-your-customer procedures, Bitfinex and Tidex do not, “requiring little more than an email address to begin trading virtual currencies.” However, the report did not offer a comment on any legal issues this may cause.
With Coinbase being the first of the exchange to come and clarify its stance on the report, we can expect the other too to come forward and state their views or implement corrective measures as stated in the report.
Will other exchanges come clean or even tighten their policies to counter the claims raised in this report? Do let us know your views on the same.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.