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Coinbase Discloses Corporate Data In Response to NY Crypto Inquiry

Coinbase, the U.S.-based cryptocurrency exchange startup, has posted part of its response to New York Attorney General Eric Schneiderman’s ongoing inquiry.

“We applaud the [Office of the Attorney General] for taking action to bring further transparency to the virtual currency markets,” Coinbase’s chief legal and risk officer Mike Lempres wrote in a five-page letter.

Schneiderman’s office launched a “fact-finding inquiry” into cryptocurrency exchanges in April, sending a detailed questionnaire to 13 firms, including Coinbase. The inquiry seeks a wide range of information about exchanges’ operations, their leadership, funding, terms of service, privacy protocols, relationships with other financial institutions and use of trading “bots.”

In the public version of Coinbase’s reply, Lempres addresses the assets kept on Coinbase’s platform ($150 billion in total), the firm’s funding ($225 million to date), its financial position (“a profitable and self-sustaining business”), and its personnel levels (over 300 employees, 1,000 total when you factor in contractors).

The letter describes Coinbase’s cooperation with law enforcement and regulatory agencies across the globe, its “state of the art” cybersecurity program, and its recent systems upgrades, which Lempres says enabled the platform to achieve 99.99% uptime in April.

It also says Coinbase is a federally regulated money service business and has been granted licenses by regulatory authorities in 31 states, including New York’s BitLicense. The letter notes that this controversial license involves “considerable regulatory oversight.”

Yet Coinbase’s full response to Schneiderman’s request will likely remain out of the public eye, per a request from the startup.

Lempres asked for “confidential treatment” for the full response, which the exchange is transmitting “via an encrypted end-to-end secure file exchange service consistent with our security protocol.”

Rachael Horowitz, Coinbase’s vice president of communications, later told CoinDesk via email:

“That full response has a bunch of highly confidential information that we are unable to share publicly. Our aim is to be as transparent as we can in responding to this action publicly so we shared the cover letter.”

Most exchanges CoinDesk contacted welcomed the New York Attorney General’s inquiry, but Kraken, an exchange that left New York due to the BitLicense, pointedly refused to cooperate.

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What Crypto Exchanges Are Saying About NY's New Inquiry

Some of the startups named today in the New York Attorney General’s cryptocurrency exchange “inquiry” say they welcome the move.

As CoinDesk reported on Tuesday, the office of New York Attorney General Eric Schneiderman has launched an inquiry into 13 cryptocurrency exchanges on Tuesday. The exchanges named were Coinbase’s GDAX, Gemini, bitFlyer USA, Bitfinex, Bitstamp USA, Kraken, Bittrex, Poloniex, Binance, Tidex.com, Gate.io, itBit and Huobi.Pro.

Schneiderman’s office sent letters to the exchanges, along with a detailed questionnaire that probes the firms’ ownership, leadership, operations, terms of service, privacy policies, trading volumes, use of “bots,” relationships with financial institutions – among other areas.

CoinDesk reached out to the 13 exchanges, and as of press time, five – Gemini, Bittrex, Poloniex, bitFlyer and Bitfinex – replied. Coinbase was not immediately available to comment, and the other exchanges have yet to respond to requests.

In a statement, Gemini CEO Tyler Winklevoss said his company “applauds” the Attorney General’s inquiry, stating that “we look forward to cooperating with and submitted our responses to the questionnaire.”

“We continue to embrace thoughtful regulation and collaboration on our mission to help build the future of money,” he added.

A representative for Bittrex struck a similar note, also stating that the exchange welcomes to the opportunity to respond: “We look forward to working with NY Attorney General Schneiderman on our shared goal of improving transparency, accountability and security across all virtual currency trading platforms.”

Josh Hawkins, vice president of marketing at Circle, Poloniex’s parent company, told CoinDesk:

“We welcome all initiatives focused on increasing transparency and accountability in the space and look forward to working with the New York Attorney General’s office. Protecting crypto currency investors and consumers has always been Circle’s first priority.”

BitFlyer USA, by way of compliance director Hailey Lennon, echoed the remarks about transparency, stating: “Transparency is important for consumer protection in this industry. We received the letter from the New York Attorney General and are reviewing the requests asked of our US exchange.”

Kasper Rasmussen, communications director for Bitfinex, offered a more measured comment when reached.

“We can confirm that Bitfinex is aware of the New York Attorney General’s inquiry regarding our operations, controls, and general user protections. Bitfinex is committed to compliance with authorities and regulators worldwide and we look forward to responding to this inquiry.”

When reached for follow-up comment on the launch of its inquiry, a spokesperson for Schneiderman’s office said that “we plan to make the information public at the end of the process since the goal here is to bring much-needed transparency and accountability to the crypto marketplace.” She declined to “comment or speculate” about potential legal action against the exchanges.

New York skyline image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.