The United States has taken to regulating cryptocurrencies very strongly. This is primarily since a large number of hacks, and other illicit activities have taken place in the crypto market. Fraudulent schemes have been floated by dubious people to rob unsuspecting victims. There have been discussions in the United States Congress with regard to cryptocurrencies. Although no concrete framework has yet been finalised, there is a broad consensus that cryptocurrencies should not be allowed to operate in an unregulated manner.
What happened in New York?
The New York State Attorney General’s Office had asked 13 cryptocurrency exchanges across the country to complete a questionnaire and submit it by the 1st of May. The crypto exchanges were required to divulge details about their ownership, fees, money laundering precautions and trading suspensions.
The New York State Department of Financial Services has made it mandatory for cryptocurrency exchanges to have a ‘BitLicense’ from them. Exchanges like Coinbase, Ripple, Circle and bitFlyer USA have the license. ItBit and the Winklevoss twins’ Gemini Trust have charters issued by the financial services department.
What was the response to the notification?
Majority of the crypto exchanges like the Gemini trust of the Winklevoss twins, bitFlyer USA and also four other exchange operators had expressed support for the request for information by the attorney general.
However, Kraken does not feel that way. Reportedly, Kraken is not going to respond to the questionnaire. The CEO of Kraken, Jesse Powell, has said,
“Kraken’s BitLicense-prompted exit from New York in 2015 pays another dividend today.”
In a statement that he shared on Twitter, he said,
“The resource diversion for this production is massive. This is going to completely blow up our roadmap!” He also added,
“Then I realized we made the wise decision to get the hell out of New York three years ago and that we can dodge this bullet.”
He justified his decision by saying,
“Ordinarily, we’re happy to help government understand our business, however, this is not the way to go about it.”
He said that Kraken had exited New York in 2015 to prevent registering for the BitLicense. The exchange, in a blog-post at that time, had called it “a creature so foul, so cruel that not even Kraken possesses the courage or strength to face its nasty, big, pointy teeth.”
According to Powell, the BitLicense was the result of the exchanges complying with the New York state’s request for information. He said,
“Kraken left New York because New York is hostile to crypto and this ‘questionnaire’ we received today proves that New York is not only hostile to crypto, it is hostile to business.”
The Attorney-General’s office
A spokesperson for the Attorney General Office defended the move by saying,
“Legitimate entities generally like to demonstrate to their investors that their money will be protected. This is basic information that credible platforms should all have on hand.”
Some other state authorities have also praised this move. Mario Vullo, the superintendent of the New York Department of Financial Services, said,
“The regulatory structure that we created for virtual currency has helped our licensed companies attract greater interest from customers, investors, and potential financial services partners.”
However, Kraken is not the only dissenting voice. There are others too who disagree with New York’s regulatory framework for cryptocurrencies. Whether or not their voice is heard remains to be seen.