July 22, 2019

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New York Attorney General Launches Fact-Finding Mission into Virtual Currency Exchanges

The Investor Protection Bureau of the New York Office of the Attorney General (Bureau) has established the “Virtual Markets Integrity Initiative,” which the Bureau describes as a “fact-finding inquiry into the policies and practices” of virtual currency exchanges.  The Bureau launched the initiative “to increase transparency and accountability in the virtual currency marketplace—and better inform the actions of enforcement agencies, investors, and consumers in this space.”

As the Initiative’s first act, the Bureau sent a questionnaire to 13 virtual currency exchanges, asking for information about 6 topics—topics the Bureau describes as “fundamental aspects of [the exchanges’] operations or issues that have already attracted significant public attention”:

  1. Ownership and control;
  2. Operational procedures and fees;
  3. Trading policies and procedures;
  4. Outages and suspensions of trading;
  5. Internal controls; and
  6. Policies regarding privacy and money laundering

The Bureau issued the questionnaire because it wants to help provide “average investors” with information “sophisticated investors” often receive before they begin trading on a platform. The Bureau is also interested in learning, among other things, how these exchanges address market manipulation; how they report suspicious activity; their fee structures; and how they protect consumers’ funds.  In addition, the Bureau asked recipients to provide written copies of their terms, conditions, and representations to consumers, as well as their written rules and procedures regarding cyber security, privacy, and money laundering, among other policies.

The exchanges are not compelled to answer.  However, the letter explained that the Bureau “will review and assess [their] responses, compare them with those of other platforms, and disclose certain information in a publicly accessible format. As part of this disclosure, [the Bureau] will identify any platforms that decline to provide meaningfully complete responses.”

Copyright 2019 K & L Gates


About this Author


Jeremy McLaughlin is an associate in the firm’s San Francisco office and a member of the Consumer Financial Service group. His practice focuses principally on regulatory compliance and government enforcement for Fintech and consumer financial products and services, with particular attention on emerging payments and compliance with state and federal consumer protection laws, state money transmitter licensing laws, and international remittances, as well as advising on privacy, data security, and PCI compliance. He represents and advises financial technology companies,...

Daniel Cohen, KL Gates Law Firm, Washington DC, Finance Law Attorney

Daniel Cohen is a first year associate in the Washington, D.C. office.

Admitted only in Virginia / Not Admitted in D.C.
Supervised by Soyong Cho, member of D.C. Bar