Earlier this week, New York state attorney general Eric Schneiderman announced that he is launching an investigation into 13 cryptocurrency exchanges. “Bitcoin, ether, and other virtual currencies are on the rise in NY and across the country. We need transparency and accountability to ensure consumers are protected,” claimed Schneiderman.
Controversial BitLicense and Investigation Into Exchanges
The controversial announcement of Schneiderman was met with criticism and the majority of digital currency users in the cryptocurrency community echoed a similar voice in saying that the state of New York has continued to unfairly punish and treat businesses in the cryptocurrency sector since 2015.
Previously, the state of New York and its department of financial services introduced the controversial cryptocurrency business-focused regulatory framework BitLicense to regulate businesses in the blockchain sector operating within the state of New York. At the time, several companies like Bitstamp stated that the BitLicense charged companies upwards to $100,000, due to legal fees and application costs.
Many companies including ShapeShift left New York because of the impractical and unsecure privacy policies of the BitLicense, and the government of New York’s unrealistic requirements for cryptocurrency businesses to comply with. Some companies like Coinbase and Bitstamp received the BitLicense and have been licensed to operate in New York.
Fast forward three years, New York state attorney general Schneiderman has led another controversial initiative and this time, the government of New York plans to investigate into cryptocurrency exchanges. The office of Schneiderman sent letters to 13 cryptocurrency exchanges operating in New York, demanding sensitive information.
“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. Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve,” said Schneiderman.
The state of New York and the NYDFS have not launched similar investigations into businesses in the traditional finance sector or banks in the past. The government of New York had not randomly initiated an investigation into banks to understand the nature of their operations and services. However, the state of New York has abruptly announced an investigation into cryptocurrency exchanges without a precise basis or purpose, and many businesses in the cryptocurrency space took offence to that.
Kraken Vows to Not Comply
Jesse Powell, the CEO Kraken, stated that it was smart by Kraken and other businesses like ShapeShift to get out of New York in 2015 and not look back, given the hostility the state of New York has shown towards the industry.
“I realized that we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet,” said Powell, adding “We can tell you which industry groups to join and where to begin your research. But when is it going to be enough for New York? We did all this once already, and then you gave us the BitLicense. Why don’t you try extracting this information from those businesses actually operating in your state? Kraken left New York because New York is hostile to crypto, and this ‘questionnaire’ we received today proves that New York is not only hostile to crypto, it is hostile to business.”