New York nightmares return to cryptocurrency exchanges like Kraken with a lengthy request for financial and operational details initiated by the New York Attorney General’s Office. It seems Kraken was still on the list of New York Bitcoin exchanges even though they deliberately left the state because of the AG’s 2015 Bitlicense bill.
All other 12 exchanges like Coinbase, Bitrexx, and Gemini have shown their support and expected compliance to the questionnaire’s two-week deadline of May 1st. However, Kraken’s CEO, Jesse Powell, has a different opinion about the state’s intentions.
He tweeted that Kraken is relieved that “[they] can dodge this bullet… 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.”
The Virtual Markets Integrity Initiative Questionnaire that can be read here, bears a similar resemblance to the requirements needed to obtain a Bitlicense only that the survey looks like an unofficial audit of the bill itself. This makes the motive behind the initiative seem doubtful as it is being portrayed as a precaution to Bitcoin buyers and altcoin traders.
Attorney General Eric Schneiderman says, the initiative is for the consumer as “consumers don’t have the basic facts they need to assess the fairness, integrity, and security of these trading platforms.” In an effort to protect the users of cryptocurrency platforms, Schneiderman says the questionnaire would begin “promoting the accountability and transparency in the virtual marketplace…”
Opponents to the AG’s involvement in Bitcoin exchange regulation include more than Kraken’s discontent of the initial demands of a Bitlicense. Assembly member Ron Kim has begun a proposal to amend the Bitcoin bill. He has many problems with the restrictions set in place that hinders the chances of start ups to build a business and the potential of the cryptocurrency market to gain profits for the state New York.
There are layers of problems with both Bitlicense requirements and its faithful follow up survey with only minimal benefits as a security measure.
- For starters, the application fee to even be considered as a legitimate Bitcoin exchange in New York is $5,000 followed by legal fees to align with the bill’s demands. The questionnaire also requires a lot of leg work in a short amount of time.
- It keeps startups from establishing their business since to be compliant means a large workforce and operational costs.
- Bitlicense holders lose profit while trying to maintain their license.
Overall, the attempt at gaining information from cryptocurrency exchanges seems to go against the discretion of their intended anonymous operations. Shouldn’t it be up to the experts who know their own blockchain and security measures to build a reputation of trust among their users, not a government issued mandate? The intention of the AG is more geared toward regulations that diminish rather than encourage and grow Bitcoin exchange companies. The state even raised electricity prices specifically to decrease the amount mining energy used for cryptocurrency companies.
The initiative to gather Bitcoin exchange information continues to cause more problems than solutions. Regulations only keep potential companies from succeeding while making compliant companies more commercial and dependent upon government licensing and fiat currency statures. The claimed intention of safety for consumers also is questionable as the bill and questionnaire do not offer a more secure solution to the problems of hacking while coins sit in online wallets. The only ones who can fix these issues are the engineers of the crypto world not politicians.