{"id":5777,"date":"2018-11-06T23:03:41","date_gmt":"2018-11-07T03:03:41","guid":{"rendered":"http:\/\/ncjolt.org\/?p=5777"},"modified":"2020-06-04T20:52:29","modified_gmt":"2020-06-04T20:52:29","slug":"virtual-currency-markets-regulation-forthcoming","status":"publish","type":"post","link":"https:\/\/journals.law.unc.edu\/ncjolt\/blogs\/virtual-currency-markets-regulation-forthcoming\/","title":{"rendered":"Virtual Currency Markets: More Regulation Forthcoming?"},"content":{"rendered":"

Last month, New York took yet another step toward regulating nascent virtual currency exchanges, which are largely used as a platform to trade virtual cryptocurrencies in a way that is similar to how securities are traded on a more traditional stock exchange.\u00a0 The Office of the New York State Attorney General released its \u201c<\/span>Virtual Market Integrity Report<\/a>,\u201d which outlined and discussed several aspects of virtual currency exchanges that could be ripe for regulation.<\/span><\/span>
\nThe report, which was focused on addressing issues of \u201ctransparency, fairness, and security\u201d in the context of virtual asset trading, highlighted five main aspects of how virtual exchanges currently operate: (1) how individuals sign up for and pay to use the exchanges, (2) the rules of the exchange, (3) how the exchanges mitigate conflicts of interest, (4) the internal security and accounting methods of the exchanges, and (5) general customer relations issues, including how the exchanges suspend trading or notify traders ahead of scheduled maintenance or outages.<\/span><\/span><\/p>\n

…the NY Attorney General\u2019s report calls attention to the most glaring gaps in the current regulatory scheme.<\/span><\/span><\/p><\/blockquote>\n

The report found three main weaknesses in the business models of the virtual exchanges it studied. First, the similarity of the virtual exchanges\u2019 role to the role traditionally played by stock exchanges was conducive to inappropriate conflicts of interest.\u00a0 Second, the exchanges were severely deficient in maintaining the level of security and surveillance capabilities necessary to prevent abusive trading or unregulated algorithmic trading.\u00a0 Finally, the report found that the protections and accounting methods that the exchanges do have in place for consumers are likely insufficient to adequately safeguard against cybertheft or accurately audit the assets being traded on their platforms.<\/span><\/span>
\nThe trading of virtual assets has been especially <\/span>litigious<\/a> over the past two years, and the Securities and Exchange Commission has filed at least six suits – half of those in the Southern District of New York – against various cryptocurrency traders in 2018 alone.\u00a0 This upshot in litigation could be the precursor to more stringent regulation of cryptocurrency markets, and the NY Attorney General\u2019s report calls attention to the most glaring gaps in the current regulatory scheme.\u00a0 <\/span><\/span>
\nIn the coming months and years, cryptocurrency traders should expect regulations to require more vigorous protections against money laundering, a frequently cited concern in the report, that could be mitigated through common-sense identification policies, such as eliminating VPN access.\u00a0 <\/span>VPNs<\/a> allow traders to access exchanges in anonymity, without revealing their location or other personal information.\u00a0 Traders might also expect a regulatory regime more akin to the regime that governs more traditional securities trading.\u00a0 The report notes that one trading platform, <\/span>Gemini<\/a>, has already partnered with Nasdaq to coordinate market surveillance and prevent unfair manipulation of virtual currency prices by unscrupulous traders.\u00a0 <\/span><\/span>
\nIt\u2019s unclear how far regulating authorities will go to strengthen consumer protections in cryptocurrency markets, but it is fair to say that, at least according to the New York Attorney General, there is plenty of work still to be done.<\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Last month, New York took yet another step toward regulating nascent virtual currency exchanges, which are largely used as a platform to trade virtual cryptocurrencies in a way that is similar to how securities are traded on a more traditional stock exchange.\u00a0 The Office of the New York State Attorney General released its \u201cVirtual Market …<\/a><\/p>\n","protected":false},"author":1,"featured_media":5549,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[51],"tags":[],"_links":{"self":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5777"}],"collection":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/comments?post=5777"}],"version-history":[{"count":1,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5777\/revisions"}],"predecessor-version":[{"id":6903,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/posts\/5777\/revisions\/6903"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media\/5549"}],"wp:attachment":[{"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/media?parent=5777"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/categories?post=5777"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/journals.law.unc.edu\/ncjolt\/wp-json\/wp\/v2\/tags?post=5777"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}