The report of the Prosecutor General of the state of new York, requesting detailed information about the job and the organization processes 13 kryptomere, receiving 10 of them, and analyzed the results, made a splash in the industry circles.
The first and most prominent reason for the noise was the failure of three exchanges to answer the Prosecutor’s questions.
The reaction to this was different. SEO Binance, Chanpen Zhao did not consider it a reason worthy of comment, preferring to talk about anything, such as global expansion plans, but not about the reasons of refusal. Kraken and her boss and founder Jesse Powell unleashed on law enforcement officers of the state of new York a waterfall of sarcasm.
The third objector – Gate.io – and is reported to the Prosecutor’s office, which is a Chinese company. I wonder if this was in China, banned the activities of kryptomere a year ago?
However, this is the case when he laughs best who laughs last. The General Prosecutor’s office, obviously not found in the acts of the three stubborn ones of kryptomere anything that directly fall under its jurisdiction, but got the occasion to appeal to the Department of financial services of the state of new York.
And if the state controller finds out that one of the three objectors still serving customers from new York, there will be consequences. And if you are American customer, who himself complains of crypto currency exchange, something umemura his interests, to officials it will be the best gift for Christmas.
Familiarity without ceremony
The derision heaped on Prosecutor’s office jokers of the Kraken, is rational, and this, of course, not comparing with annoying ex who is trying to control. In an effort to form a picture of the developing market, the state office of public Prosecutor of new York has collected and systematized a solid body of data on the specifics of kryptomere who still try to find in the public domain.
The report featured data collected from ten “trading platforms, often called exchanges”: Bitfinex, bitFlyer USA, Bitstamp, Bittrex, Coinbase, Gemini, itBit, and Poloniex, Tidex and HBUS.
It is clear why the report calls these known kryptomere exchange with such a clause. It is unlikely that the officials hoped that the crypto currency exchange operate in strict accordance with the detailed and thoughtful set of rules which have emerged for LSE, NYSE and other reputable stock exchanges in the traditional sense of the word. But the result certainly exceeded their expectations.
The surprises started with the registration procedure – so, Tidex argues that for any transaction, it is enough to know the name, phone number and e-mail user. A dataset of name, address and e-mail allows you to open and close positions for purely cryptocurrency pairs on HBUS, and at Bitfinex for this you need to specify the e-mail and citizenship.
However, for withdrawal of funds from these two exchanges will need more information – documents, photos, phone number. The rest of the exchange requesting extended package of documents for all transactions: lists differ somewhat, but generally this is a photo of the documents proving identity and address, social security number, telephone number and Bank details, without which, in General, difficult to do if you Deposit or withdrawal. Bitstamp and Coinbase can also ask about the purpose of trading operations. Interestingly, the phrase “greed” is acceptable?
Without exception, study participants stated that they track IP addresses of users. However, the use of a VPN is prohibited only to customers of Bitstamp and Poloniex.
Finances and preferences
HBUS, Poloniex and Tidex allow replenishment of balance and withdrawal of funds only in the cryptocurrency, the other seven in the Fiat, in all cases the U.S. dollar single currency Fitna, or one of several that, in General, is not surprising.
The fee for depositing and withdrawal of funds do not take only three crypto currency exchange – Bittrex, HBUS and Gemini. Bitstamp allows no Commission to fill the balance of the only in the cryptocurrency, charging a fee for any withdrawal method for replenishment by Bank payment or card. Bitfinex, on the contrary, takes no Commission for Deposit and withdrawal of funds on the card, but charges when using other options. Approaches of other exchanges vary from case to case.
Difficult? No more difficult than the Commission of the transactions themselves, traditional sources of income exchanges without the prefix crypto. Here the options are also missing. Half of the survey respondents charge the same rate of Commission from both parties to the transaction, half – uses a model of maker-taker. Customers Bitfinex, Coinbase, Gemini, itBit, and Poloniex should be prepared for the fact that the party to the transaction that opened the order, i.e. “creating” liquidity, pays a lower Commission rate than the party to the transaction and “taking” liquidity.
This model, according to the attorney General of new York, can create incentives for professional traders at the expense of the fans, not the only such possibility.
Only one of the surveyed exchanges Bittrex stated that it does not provide discounts for large customers that operate on large volumes of transactions. bitFlyer USA, Bitstamp, Gemini, HBUS and itBit frankly admitted that large traders can “expect some discounts in the framework of bilateral agreements with the stock exchange”. Available for all clients, documents and regulations of the size of these discounts, of course, are not called.
Conscience – the best controller
Whales are not the only category of traders that “the investor on the street” is difficult to compete. Unlike conventional exchanges, crypto currency exchange I see nothing wrong in having their own staff participated in the auction.
That is, ordinary investors have to compete not only with professionals but also with people who may have insider knowledge, like knowing about the expected listing of the new token, or Vice versa, about the future of the delisting, and use them to your advantage.
Some restrictions still exist, some of crypto currency exchange, for example, forbid employees to trade on foreign platforms. Gemini and Bittrex require staff regular reports on trading activity and the ownership of bitcoin, Bittrex still limits for staff participation in the trading two days a quarter. But for the staff of Bitfinex, itBit, and Tidex, there are no restrictions in this area.
Whales preferences and technology like automated trading and individual staff exchanges, armed with insider information, is only half the problem. The exchange is also actively involved in bidding on their own sites.
Strictly speaking, this practice is normal in the world of Finance, subject to certain conditions and restrictions is permissible for the operators in the status of alternative trading platforms. But in the case of cryptomeria, of course, they themselves limiters. Prop-trading is practiced five exchanges out of 10, another is questionable, because it evaded the answer. The size of these operations varies according to respondents, from 1% to 20% of trading volume.
This situation creates at least an overstatement of trading volume – the reliability of these data and the already become a byword. But much worse is the fact that the exchange may manipulate the exchange rate of cryptocurrencies, acting as a market maker, that is, opening and closing their positions with the desired courses. And it is obvious that the exchange participating in trading on its territory, initially has advantages over other members as it sees the most complete picture of what is happening.
Fraud and security
Formal policy to counter manipulation in the market there are four stock exchanges Bittrex, Coinbase, Gemini, and HBUS, the rest of the formalities didn’t bother. All exchanges there is a formal ban on the opening of one user multiple accounts, which if not developed procedures KYC can easily be circumvented, for example through a VPN.
Details about their safety systems, protect digital assets and customer data of the crypto currency exchange for obvious reasons shared are extremely reluctant. So, they all said that offer customers a two-factor authentication, and optional this precaution is only on two sites, Bitfinex and Tidex. Some exchanges offer customers to make the “white lists” your trusted IP addresses.
The story of the hacking of exchanges learned from market operators – most of the assets they are trying to keep to “cold wallets”. The majority of respondents exchanges also attract outside experts to test their new developed system security and identify potential vulnerabilities.
Some of the market participants came to understand the need for insurance of their assets, however, due to the infancy of the industry on the market is missing a clear understanding of what assets to insure better, from what kind of risks and how much it might cost. Same story with the audit of the exchanges in General have no objection to this procedure, but auditing standards have not yet developed.
In General the document was very informative and it did not go unnoticed. The reaction of ordinary customers and exchanges of experts was given to understand that the statement of the Kraken that manipulation is “don’t care about the majority of traders”, to put it mildly, not true.
“It was a very informative read” – discreetly commented on the work of the Prosecutor General’s office of new York city don Wilson, founder of DRW, which includes and capturedimages division of Cumberland. According to him, traditionally clients of kryptomere feared for their safety, but knew about other Affairs. “Of course, we have long suspected something, but due to the lack of transparency weren’t sure”, he added.
Economist and trader Alex Kruger on the findings of the report spoke in greater detail. “The exchange has not taken serious measures to prevent manipulation of trading data. Too often, conflicts of interest, and measures for the protection of investors – “often illusory”. In the end, the probability of approval bitcoin ETF before the end of 2018 – 0%… or let it be 0,1%”.
Responding to the remark of the commentator that the normal exchanges also allow similar, Kruger finally placed points over i: “Exchanges do not trade against their own customers, and do not produce their own stock.”
This reminds me of another document – the British parliamentarians last week released a report which compared the situation with the regulation of cryptocurrencies “atmosphere of the Wild West.” If we are distant from the aesthetics of westerns, the British chose this image, probably something from the era of the development of America in this really is. The spirit of enterprise, new opportunities, danger lurks at every step… And cheats from saloons where the same without them.
Of course, the potential captainvalor may well be a fan of westerns. But he is associating himself with a successful prospector, not with the Mustang carrying the hero towards a new life. Not supernumerary, which perforates the Indian arrow immediately after the opening credits. And not with a settler, losing all their belongings to the unclean into the hands of the player. So, he would welcome any efforts by the Sheriff to restore order. Because to settle in the prairies only once they become safe.