Cryptocurrency exchanges are vulnerable to market manipulation, says New York AG
There’s a general sense of uncertainty and insecurity among investors when it comes to dealing with cryptocurrency exchanges, as they are vulnerable to market manipulations and lack the security cover for consumers that come with traditional financial markets. This has been revealed by the findings of a month-long investigation by the New York Attorney General’s office, as CNBC reports.
According to the “Virtual Markets Integrity Report” published on Tuesday, cryptocurrency exchanges are not paying enough attention to the issues of “transparency, fairness, and security” in cryptocurrency trading.
“The industry has yet to implement serious market surveillance capacities, akin to those of traditional trading venues, to detect and punish suspicious trading activity,” the report highlights.
The report also highlights the varied approaches that trading platforms have adopted in dealing with these risks. Some have taken significant, concrete steps to improve the safety, reliability, and transparency of their operations. Others have not.
“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,” the report said.
Regulators voice concerns about the need for greater transparency
It’s not a new development with American regulators voicing concerns about the need for market surveillance and consumer protection. As reported earlier by BC Focus, the SEC rejected two proposals by ProShares on Bitcoin ETF in August.
In a scathing remark, the SEC went on to add, “Among other things, the Exchange has offered no record evidence to demonstrate that bitcoin futures markets are ‘markets of significant size.’ That failure is critical because the Exchange has failed to establish that other means to prevent fraudulent and manipulative acts and practices will be sufficient, and therefore surveillance-sharing with a regulated market of significant size related to bitcoin is necessary to satisfy the statutory requirement that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices.”
Citing security concerns of individual investors, the report goes on to say:
“These platforms lack a consistent and transparent approach to auditing the virtual currency in their possession. As a result, customers are often left helpless if their cryptocurrency goes missing. Customers are highly exposed in the event of a hack or unauthorized withdrawal.”
“There are serious questions about the scope and sufficiency of the commercial insurance that certain platforms purport to carry to cover virtual asset losses,” the report adds.
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