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NY attorney general asks bitcoin exchanges to explain themselves

A new fact-finding inquiry seeks to discover how the exchanges work and what they're doing to fight bots, money laundering and market manipulation.

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Aaron Robinson/CNET

New York Attorney General Eric T. Schneiderman on Tuesday launched a fact-finding inquiry into the policies and practices of 13 platforms used by consumers to trade virtual currencies like bitcoin and ether. 

Cryptocurrency exchanges match buyers and sellers of virtual currencies. As part of the attorney general's inquiry, his office sent questionnaires asking the exchanges to explain how they operate and what they're doing to protect consumers' investments. 

"With cryptocurrency on the rise, consumers in New York and across the country have a right to transparency and accountability when they invest their money. Yet too often, consumers don't have the basic facts they need to assess the fairness, integrity, and security of these trading platforms," Schneiderman said in a statement. "Our Virtual Markets Integrity Initiative sets out to change that."

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There are an increasing number of digital currency exchanges like Coinmama, CEX, Kraken and Coinbase -- the largest and most established of them -- where you can buy, sell and store different virtual currencies, such as bitcoin. Participation is remarkably easy. With Coinbase, for example, you can use your bank (or PayPal account) to make a deposit into a virtual wallet, which lets you then exchange traditional currency for bitcoin. 

Schneiderman's office sent questionnaires to Coinbase, Gemini Trust Company, bitFlyer USA, iFinex, Bitstamp USA, Payward (Kraken), Bittrex, Circle Internet Financial Limited (Poloniex), Binance Limited, Elite Way Developments (Tidex.com), Gate Technology (Gate.io), itBit Trust and Huobi Global (Huobi.Pro). 

The questionnaires ask the exchanges to describe how they combat suspicious trading and market manipulation; their policies on bots; access to nonpublic trading information; and the steps they take to protect customer funds from theft, fraud and other risks.