Yesterday, it was reported through several outlets that the CEO of Kraken, one of the world’s biggest crypto exchanges by trading volume, has refused to agree to an order from the New York Attorney General to make most of its internal information, public. On the other hand, Tyler Winklevoss, who acts as the CEO of the Gemini exchange, has effectively thrown his support behind the inquiry.
What exactly does this mean and what is being asked of these companies? Essentially, it seems that the attorney general would like to treat all major cryptocurrency exchanges the same as public stock exchanges, at least with regards to company documents related to risk management, trading policies, leadership and other areas being made public.
If all of this is made public by every one of these exchanges, it could be quite bad for the space, to say the least. The essence of the crypto-industry is transparency, but not with regards to making all customer and company information public. If every crypto exchange will be treated like a public company, then decentralization will be non-existent.
As a consequence of this, DAOs would become non-existent and every crypto company would have the typical structure of a public company, complete with a board of directors and traditional managers as well as therefore, decisions usually being made in the waterfall model. It should be made clear that this is not necessarily true in the case of this inquiry but it is a fairly logical implication which can be drawn from it.
On the other side of things, the New York attorney general has reportedly said that the main purpose of asking these questions is to later implement policies to better protect customers in the industry. The problem with this idea could be that the very nature of a crypto firm is such that the responsibility of protecting the customer usually falls to the customer network, at large.
Ostensibly, related to all of this, Kraken would have been pressured further to accept the inquiry if they were still primarily housed in New York. In what could be considered a stroke of luck, however, they moved their physical headquarters out of New York in 2015, due to BitLicense. If you don’t already know, BitLicense is essentially a law that makes it required for crypto-businesses to have special business licenses to operate in New York. In response to it, most of the top crypto-firms left New York completely, though Gemini, the brainchild of the Winklevoss twins, has stayed there and prospered under regulation.
In total, 13 exchanges were asked to provide the same information. All in all, it remains to be seen how all of the other CEOs will respond and how their responses will snowball into action from internal and external actors. Whatever the decision is that is made in the end, it might be best to form a DAO to solve this issue, as has been suggested by the Winklevoss twins. More specifically, such a DAO would involve internal and external actors and would be run by an elected board of directors. Such a solution might be difficult due to Gemini and the twins sometimes being seen as largely supporting regulation over innovation. Ideally, in the end, despite all of this, a compromise of some kind will be made and the crypto community will still foster innovation, within reason.
By: BGN Editorial Staff