According to a new report that was published by the New York Attorney General’s office, Cryptocurrency exchanges might face some risks including manipulation, conflicts of interest, and other risks about consumers. The report was published on 18th of September.
New York Attorney General Eric T. Schneiderman wanted to get information about operations, internal controls and other important issues from 13 crypto exchanges by sending letters to each of them. As a result, the “Virtual Markets Integrity Initiative” was started in April. This report is based on the results of this initiative.
The aim of the move was to make average investors know more about the risks and how they can protect themselves while they are trading cryptocurrencies, as well as to increase transparency.
The practices of ten crypto trading platforms based in the US and other countries were examined and datas about the state of digital currency markets were collected by the Attorney General’s office. All these datas were gathered together. Finally, the report was prepared and published.
According to the result of the report, there is a lack of consistent and transparent approach to independently auditing digital currency that is traded on exchanges. Because it was seen that the essential and accepted methods for auditing virtual assets aren’t applied. This causes the risk of attacks of the hackers to the customers’ funds held on their exchange accounts and thus they might be stolen. Besides, the report focuses on the importance of public protection and highlights that the commercial insurance to prevent possible loses need to be sufficient.
The report also highlights the possible risks of crypto market. One of those risks are abusive trading practices. Automated traders are included in the majority of crypto platforms and they have some special advantages. In this case, the ordinary customers are taken into a disadvantage circumstance. Another risk is the manipulation of the prices. It is explained in the report that a single user or group of traders can command multiple accounts at the same time to obscure coordinated trading and that leads to the manipulation of the prices because of automated trading activities.