A report by the Attorney General’s Office of the State of New York, saying three cryptocurrency exchanges may be operating illegally in its jurisdiction, has caused something of a stir.
The 42-page report – authored by the Attorney General Barbara D. Underwood – suggests that because Kraken, Binance and Gate declined to cooperate and provide requested information, the three have been referred to the state’s regulatory body, Department of Financial Services, for potential violation of New York’s virtual currency rules. Kraken said the invitation to collaborate was “insulting”.
Underwood stated that Kraken’s refusal to cooperate was “alarming. In announcing the company’s decision not to participate in the initiative, Kraken declared that market manipulation ‘doesn’t matter to most crypto traders,’ even while admitting that ‘scams are rampant’ in the industry.”
Unhappy crypto exchanges
Kraken and Coinbase immediately reacted to the report, claiming it was abusive and misleading.
“NY is that abusive, controlling ex you broke up with three 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,” Kraken CEO and Co-Founder Jesse Powell tweeted.
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
Kraken also replied to the report on Twitter, asking whether it was “a coincidence that this was published the day before the expiration of the @CBOE futures contract?” It also questioned “who traded on insider information and what is being done to prevent manipulation by @NewYorkStateAG employees? Quis custodiet ipsos custodes (who watches the watchers)?”
Kraken halted operations in New York in 2015 when the state introduced the BitLicence, a special permit for crypto exchanges. Most cryptocurrency trading firms reacted to this with the claim that it was too much of a burden.
“We must, however, object to the highly unprofessional/malicious implication that because we did not respond to the voluntary information request, we *might* be operating illegally. We told you we don’t operate in NY. AG trying cases in court of public opinion now?” reads another tweet.
Is it a coincidence that this was published the day before the expiration of the @CBOE futures contract? Who traded on insider information and what is being done to prevent manipulation by @NewYorkStateAG employees? Quis custodiet ipsos custodes? https://t.co/XwrW46ywdf
— Kraken Exchange (@krakenfx) September 19, 2018
Coinbase weighs in
Coinbase Chief Policy Officer Mike Lempres said the report had led to a misrepresentation of the exchange’s business in the media.
Underwood says in the report that Coinbase had admitted: “that almost 20% of executed volume on its platform was attributable to its own trading”.
Lempres insists Coinbase does not “trade for the benefit of the company on a proprietary basis. When Coinbase executes these trades, it does so on behalf of Coinbase Consumer customers, not itself”.
Shapeshift CEO Erik Voorhees warns that New York State is hampering innovation and growth and affecting its global finance position.
“Those kinds of people never seem to realise their behaviour 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,” he comments.
Voorhees previously criticised New York officials in May. “Here we are two miles from the Statue of Liberty, and you cannot sell CryptoKitties in the state without that license. That’s the absurdity of what’s happened here,” he said.
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