According to New York’s Attorney General, the best way to learn how cryptocurrency exchanges work might be simply asking them.
In April, the AG’s office sent questionnaires to 13 crypto exchanges, asking about everything from their trading operations to their insurance policies. On Thursday, it released a report based on those responses — and the results don’t inspire confidence.
Ten of the 13 exchanges submitted responses, including major players Bitfinex and Coinbase. According to the report, these responses give crypto investors three broad reasons to be wary.
First off, exchanges have many potential conflicts of interests, in some cases owning large quantities of the same currencies they help investors trade. They also aren’t doing much to prevent abusive trading practices. And the platforms do little or nothing to protect customer funds — though some do give the illusion of protection.
It’s hard to know how seriously we should take this report. After all, the information it contains was all willingly submitted by the exchanges themselves. There’s no way of knowing whether they fudged the facts in their favor the same way a less-than-scrupulous employee might lie on a self-evaluation.
If the exchanges were less than honest, the crypto space could be even less scrupulous than the report paints it. The only way to know for sure may be through more stringent inquiries into their practices.
READ MORE: New York’s Damning Report on Crypto Exchanges Will Be Good for the Industry [MIT Technology Review]
More on cryptocurrencies: New York’s Attorney General Begins Inquiry Into Cryptocurrency Practices
Disclosure: Several members of the Futurism team, including the editors of this piece, are personal investors in a number of cryptocurrency markets. Their personal investment perspectives have no impact on editorial content.