Crypto exchange Kraken has responded to the New York Attorney General’s (NYAG) inquiry launched last week into cryptocurrency exchanges, calling the initiative a “publicity stunt,” and referring to Japan’s virtual currencies act as a “good example” of “relatively” reasonable regulation, according to a blog post April 22.
Attorney General (AG) Eric T. Schneiderman launched the “Virtual Markets Integrity Initiative” on April 17 by sending letters to 13 cryptocurrency exchanges, giving them a two-week deadline to answer a three-page questionnaire covering topics like market manipulation, preventing insider trading, and customer funds protection. Kraken writes that this initiative “comes off as a publicity stunt,” adding that they “would have given the same response to the AG of North Korea.”
Kraken states they found the NYAG’s initiative offensive, saying that the two-week deadline is too short, the questions are “irrelevant,” and most of the information asked for is either available on their website, was already provided to government bodies, or is confidential due to security reasons or as trade secrets.
Kraken also points out that they have no New York customers, as they left after the implementation of the BitLicense:
“AG demands Kraken, which has no NY clients, to assist in protecting NY consumers (presumably against those who have obtained the BitLicense), without offering any sort of compensation for the professional consulting work.”
Kraken ends their criticism of the AG’s inquiry by suggesting the future possibility of working with the government on regulation if it is “rational”:
“We would be happy to work with the NYAG and the NYDFS (again) on a strategy for replacing the BitLicense with something rational […] We would do this for free, as a gift to the people of New York [but] Making surprise, public, unreasonable demands is not getting off on the right foot toward re-establishing trust and building a relationship.”
Kraken then elaborates on their recent decision to leave the Japanese market, citing more scrutiny in the wake of the Coincheck hack in January. However, they note that Japan’s Virtual Currency Act is a “a good example of what (relatively) reasonable regulation can do for a country,” adding that “hopefully, Kraken will find an opportunity to re-enter the market in the near future.”
Kraken notes that the biggest crypto exchanges have already been collaborating on crime reduction, especially in regards to freezing stolen funds that have been moved to different exchanges.
Kraken concludes that regulators should consult organizations that have already set good regulatory examples:
“Rather than handing down commandments from the ivory tower, regulators ought to seek the expertise of these businesses who have survived and managed to earn the trust of consumers and law enforcement over the years […]”