New York Attorney General Starts Cryptocurrency Exchange Investigation

New York’s attorney general has officially put forth an investigation into cryptocurrency exchanges, he announced on Tuesday (April 17).

Attorney General Eric Schneiderman said in a statement that he is launching the Virtual Markets Integrity Initiative, which aims to improve transparency and accountability of a number of cryptocurrency trading platforms in an effort to “protect virtual currency investors.”

According to the statement, letters to 13 cryptocurrency exchanges have been sent asking for further details on their operations.

Letters sent to the virtual currency trading platforms include: Coinbase, Gemini Trust Company, bitFlyer USA, iFinex, Bitstamp USA, Payward, Bittrex, Circile Internet Financial, Binance, Elite Way Developments, Gate Technology, iBit Trust Company and Huboi Global.

“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,” Schneiderman said in the release.

Schneiderman continued, alleging that the Virtual Markets Integrity Initiative will aim to promote accountability and transparency across digital exchanges, and stating that it is something “investors and consumers deserve.”

Exchanges are to provide information in six key areas, such as ownership and control; basic operation and fees; trading policies and procedures; outages and other suspensions of trading; internal controls; and privacy and money laundering. The trading platforms have until May 1 to complete the questionnaire.

The letter addressed to the trading platforms states that the questionnaire will benefit not only professional investors and financial firms, but all consumers that trade across virtual currency platforms, so “they better understand their operations and the associated risks.”

“Virtual currency is … a highly speculative sector, featuring significant volatility, instability, and risk,” the letter reads. “Moreover, published reports indicate the sector has attracted fraudsters, market manipulators, and thieves.”

In a statement to CNBC, Tyler Winklevoss, CEO of Gemini, said that the company looks forward to complying with the attorney general’s request and, in fact, applauds the the attorney general’s focus in the industry and the Virtual Markets Initiative.

It’s no secret that excitement bubbling in the cryptocurrency space has dominated headlines in the months and days leading up to bitcoin’s high of just over $19,000 in December of last year. After entering 2017 at just under $1,000 per token, bitcoin increased roughly 1,822.65 percent to its 2017 highs.

Since then, bitcoin has had a much more volatile 2018, dropping more than 50 percent to $7,923.06 as of 6:49 p.m. EST on Tuesday.

Other cryptocurrency favorites like ethereum have suffered similar fates. Ethereum reached a high of $1,366.29 on January 10, but has since dipped back to $505.25 as of 6:51 p.m. EST on Tuesday, according to data from Coinmarketcap.

That being said, the top cryptocurrencies have still made impressive gains over a one-year period. Since April 17, 2017, bitcoin has increased from $1,192.49 to $7,923.06, representing a 564.41-percent increase, while ethereum has increased 940.46 percent from $48.56 since April 17 of last year.

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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.