FT: crypto exchanges hit back at NY AG’s virtual markets report

While welcoming the New York Virtual Markets Integrity Report, Coinbase’s chief policy officer Mike Lempres also said in a blog post that the media inaccurately characterized the report’s findings, which are based on information that Coinbase voluntarily provided in the Virtual Markets Integrity Initiative Questionnaire.

The report states: “Coinbase disclosed that almost twenty percent of executed volume on its platform was attributable to its own trading.”

Lempres wrote: “Coinbase does not trade for the benefit of the company on a proprietary basis. In order to provide an easy-to-use customer experience, Coinbase Consumer quotes a price and then quickly fills the order from our exchange platform (Coinbase Markets). This takes advantage of the liquidity provided by the entire Coinbase ecosystem. When Coinbase executes these trades, it does so on behalf of Coinbase Consumer customers, not itself.”

By contrast, bitFlyer said it was reviewing the report and would “use its findings to better benchmark our services and policies”.

The NY AG’s office also announced that it had referred three platforms that declined to hand over any data — Binance, Gate.io, and Kraken — to New York’s Department of Financial Services for “possibly operating unlawfully” in the state. Crypto start-ups are only able to do business in the state if they gain formal accreditation, known as a BitLicense.

Jesse Powell, the chief executive of San Francisco-based Kraken posted a tweet late on Wednesday comparing New York to a “abusive, controlling ex”, alongside the hashtag “getoverit”. Kraken has said it does not accept trades from clients in New York. Gate.IO and Binance could not be reached for comment by the FT.

Quis custodiet ipsos custodes? directly translates to: “Who will guard the guards themselves?”

The concerns over market manipulation have thrown CME Group, the world’s largest futures exchange, into the spotlight. The group offers bitcoin futures based on the cryptocurrency prices at several exchanges, including Kraken.  A spokesperson for CME said the exchange was reviewing the report. “Through our information sharing agreements with the bitcoin Reference Rate exchanges, we have the ability to obtain data whenever we see concerning market behavior,” the spokesperson said.

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