Binance is now very much a global operation but to date has seemed to avoid the US, with its intensive regulatory scrutiny. Photo: Binance.com

A report published on Tuesday by New York Attorney General Barbara Underwood said her office has referred three prominent crypto-currency exchanges, Binance, Kraken and Gate.io, to the New York Department of Financial Services for “for possibly operating unlawfully in New York” after each exchange had refused an earlier request from New York State for information.

Asia-facing Binance is often said to be the largest exchange in the world and claims daily trading volumes of in excess of $1 billion by volume. Kraken is one of the best known of the exchanges in the US, with $133 million in daily volume and is ranked as the 14th biggest, while Chinese exchange Gate.io is, according to CoinMarketCap.com data, the 27th biggest in the world.

In April the New York State Attorney General office sent questionnaires to 13 major exchanges asking who owns them, how they trade and how they charge.

The questionnaires asked the exchanges “to disclose information falling within six major topic areas: (1) Ownership and Control, (2) Basic Operation and Fees, (3) Trading Policies and Procedures, (4) Outages and Other Suspensions of Trading, (5) Internal Controls, and (6) Privacy and Money Laundering.”

The subsequent “Virtual Markets Integrity Initiative report” released on Tuesday included the findings from the nine exchanges that complied with the request. These were Bitfinex (operated by iFinex Inc), bitFlyer USA, Inc, Bitstamp, Ltd, Bittrex, Inc, Coinbase, Inc, Gemini Trust Company, itBit (operated by Paxos Trust Company) and Poloniex (owned by Circle Internet Financial Limited). Binance, Kraken and Gate.io did not reply to the request.

The report claimed “areas of concern” in the way exchanges often operate that included lack of protection from abusive trading practices, conflicts of interest and limited safeguarding of customer funds. Bloomberg reported that the attorney-general report also noted that some exchanges engage in proprietary trading, meaning they trade on their own platforms on behalf of themselves.

“New Yorkers deserve basic transparency and accountability when they invest – whether on the New York Stock Exchange or on a crypto-currency platform,” Underwood said in a statement. “Many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity and security of their exchanges.

“Virtual asset trading platforms have yet to implement serious efforts to monitor and stop abusive or manipulative trading,” continued Underwood. “Few platforms seriously restrict, or even monitor, the operation of ‘bots’ or automated algorithmic trading on their venue.”

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