Cryptocurrency exchanges are too sensitive to the risk of manipulation

Cryptocurrency exchanges are too sensitive to the risk of manipulation: new criticisms of the sustainability of "exchanges".

Cryptocurrency exchanges are too sensitive to the risk of manipulation - crypt3 1024x705

A fair number of Exchange of criptovalute they would lack basic consumer protection and are vulnerable to exploitation by market manipulators, the New York Attorney General's Office said a few days ago.

The report, the result of a survey lasting several months, found that many exchanges lack adequate safeguardsthus putting consumer money at risk. In addition, the Attorney General's Office referred to three exchanges with the New York Department of Financial Services for possible illegal operation within its jurisdiction.

"Many virtual currency platforms lack the policies and procedures necessary to ensure the fairness, integrity and security of their exchanges”State attorney general Barbara Underwood said in a statement. Former New York attorney general Eric Schneiderman started the investigation program on the integrity of virtual markets in April and requested information from numerous exchanges specializing in bitcoin and other cryptocurrencies. Ten exchanges would have met requests for information, while four would have failed to do so, claiming that they were not operating in the state. The attorney general's office, however, concluded that three of these exchanges, Kraken, Binance and, actually allow trading by New York clients.

“The Attorney General's report highlights the value of strong state regulation and the consumer protection”Said Maria Vullo, superintendent of the State Financial Services Department. "We look forward to reviewing the information and references processed."

Let us remember how Bitcoin was launched in 2009 as a form of electronic money, to be exchanged without governmental or banking control. In the following years, the global cryptocurrency market has grown dynamically, and hundreds of other cryptocurrencies have started in the wake of the progenitor.

The issue of market integrity has become one of the key issues affecting the development of cryptocurrencies. The Commission on commodity futures trading in the United States is investigating potential market manipulation, as well as the United States Department of Justice. The Securities and Exchange Commission has consistently rejected requests for exchange traded funds with bitcoin, concluding that there is not enough transparency to be sure that prices are not being manipulated.

In short, the issue on which the Attorney General's report dealt is certainly not unknown, but it is interesting to note that the final dossier draws three main conclusions that validate these concerns. Indeed, the report concluded that many cryptocurrency platforms they have not taken serious measures to monitor and block manipulative trade, and few control or limit the use of trading bots.

"Most platforms appear to target professional and automated operators, with many locations offering special prices and other features to those operators, leaving retail customers at a disadvantage," says the report.

The report also states that you are "pervasive" conflicts of interest between exchanges. "Virtual asset trading platforms often involve several lines of business that would be restricted or carefully monitored in a traditional trading environment," says the report.

Some platforms, he said, operate as exchanges, broker-dealers, money transmitters, proprietary traders who buy and sell for their accounts, owners of large cryptocurrency holdings and even in some cases as cryptocurrency issuers. Some exchanges also allow their employees to hold and trade on their own or competing platforms.

Finally, protections for consumer funds, according to the report, "are often limited or illusory". There are no standard methods for controlling virtual resources, and platforms lack consistent and transparent approaches to doing so, says the report. “This makes it difficult or impossible to confirm whether the platforms manage their customers' activities responsibly. Customers are very exposed in case of retaliation or unauthorized withdrawal, "says the report.

The report also provides investors with a list of eight questions they should expect exchanges to be able to encounter, including questions about controls to prevent abusive traders from leaving the platform, details of hacker security measures, insurance details. against theft, policies to prevent employees from negotiating inside information and details on transparency and independent audits. "Customers would do well to avoid platforms that cannot satisfactorily answer the questions asked in this report," said the prosecutor.