What is the NY AG report on crypto exchanges really saying?

Leo Zhang

By Leo Zhang

It's no secret that cryptocurrency exchanges are raking in billions. However, they are also in a rather undefined regulatory territory, at least those operating in the US. An inquiry by New York's attorney general launched in April. This week, New York's new AG showed she would carry the banner of his predecessor, publishing an extensive report on a handful of cryptocurrency exchanges.

NY AG report in Twitter thread

The report sparked a wide array of discussions among the community, and triggered some interesting responses from the exchange operators mentioned in the NY AG report.

Correcting the record: Coinbase does not engage in proprietary trading
(Coinbase)

"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."

Kraken CEO's response

CME's crypto partners get called out by New York regulators
(Bloomberg, by Matthew Leising)

"Two of them, Bitstamp and itBit, have no formal policies for fighting market manipulation (...) A third -- Kraken, which refused to participate in the attorney general's review -- has made "alarming" public comments about abusive trading, including that manipulation "doesn't matter to most crypto traders" even "scams are rampant."

About the NYAG's crypto report
(Messari's unqualified opinions, by Katherine Wu)

"AG’s Underwood’s 'concerns' could merely be a warning: 'y’all better step your game up and make some changes NOW before we come slap you with all of the civil and criminal charges that we can.' And that warning probably applies to all the exchanges operating in NYS, not just Kraken."

New York, the jealous ex?

Technical Updates

Bitfury launches new suite of Bitcoin mining hardware
(The Bitfury Group)

A brief study of cryptonetwork forks
(Placeholder, by Alex Evans)

"The loyalty of users to the parent network is matched by that of core protocol developers. Comparing the top contributors of Bitcoin to Bitcoin Cash, Ethereum to Ethereum Classic, and ZCash to ZClassic, their corresponding developer communities diverge over time (note that the recency of the Monero forks precludes serious comparative analysis of the codebase). Following Azouvi et al’s work, I compute the Sorensen Dice coefficient for each network and its child. Plotting the coefficient over time (Figure 2), we see a clear divergence in the contributors beginning at the time of the fork (lower numbers imply less overlap in core developers)."

News & Commentary

One of investors' favorite governance blockchain is handing over $20 million
(CoinDesk, by Brady Dale)

"Announced last October, Politeia gives users a way to carry out conversations and community-wide decisions, vote them through and maintain a permanent record of such decisions. It allows the community to extend governance beyond verifying blocks into more complex issues, like grantmaking from the treasury or protocol upgrades."

Japanese cryptocurrency exchange hacked, $59 million in losses reported
(CoinTelegraph, by Helen Partz)

"According to a local report, as a result of a security breach on September 14, hackers managed to steal 4.5 billion yen from users hot wallets, as well as 2.2 billion yen from the assets of the company, with total losses amounting to 6.7 billion yen or around $59.7 million."

Use regulated stablecoins, get censorship
(Tony Sheng)

"In the short term, it may not matter whether that stable currency is censorship-resistant or not–US Dollars are desirable despite censorability in nations experiencing hyperinflation. But over time, the theory goes, people will prefer a store of value that cannot be seized or tampered with."

The attention revolution: Your next browser will pay you
(Hackernoon, by Daniel Colin James)

"Users have responded by installing ad blocking software in droves; more than 600 million devices are now blocking ads, with penetration at 30% in the United States. Those numbers are increasing every year. Mobile ad block usage has exploded in Asia and will soon spread to North America and Europe."