Jessie Powell, the co-founder & CEO of the Kraken Cryptocurrency exchange has recently found himself on the frontlines of a regulatory battle with officials in New York, after refusing to cooperate with a formal inquiry requested by the state’s Attorney General.
Kraken is one of many crypto startups that fled New York after the mandate of a “BitLicence” was imposed. New laws in the state require any business classified as a “money transmitter” to apply for a tremendously expensive license that would require them to share detailed business records with government agencies, including client information.
The application cost of the license itself is of $5,000, but the legal fees associated with the process of becoming legal in the state are estimated to be anywhere between $50,000 and $100,000 for some companies.
Other businesses that left the state in response to the license were Bitfinex, Kraken, LocalBitcoins, Paxful, and Poloniex, BitQuick, BTCGuild, Eobot, Genesis Mining, and GoCoin.
In April of this year, The New York Office of the Attorney General (OAG), launched an inquiry into cryptocurrency exchanges under the pretense of protecting consumers, citing various scams and security problems the growing industry has been working to address.
The inquiry requested a large volume of data from 13 of the world’s largest exchanges including Coinbase, Bitfinex, Bittrex, Binance, and of course Kraken. After receiving the request, Powell published a lengthy statement online explaining why he was refusing to comply with the order.
Somebody has to say what everybody's actually thinking about the NYAG's inquiry. The placative kowtowing toward this kind of abuse sends the message that it's ok. It's not ok. It's insulting. https://t.co/sta9VuXPK1 pic.twitter.com/4Jg66bia1I— Jesse Powell (@jespow) April 18, 2018
The statement received support from other high-profile figures in the industry, including ShapeShift CEO Erik Voorhees. Via Twitter, he thanked Jesse for “taking the ethical stance and speaking up for what's right,” adding that crypto brought “more transparency to finance and protection to consumers than the last 100 years of bureaucratic nonsense that has spilled from the sewers of New York.”
In the Attorney General’s report, Kraken was singled out for Powell’s public comments about the order. The report stated:
"The OAG could not review the practices and procedures of non-participating platforms (Binance, Gate.io, Huobi, and Kraken) concerning manipulative or abusive trading. However, the Kraken platform's public response is alarming. In announcing the company's decision not to participate in the Initiative, Kraken declared that market manipulation 'doesn't matter to most crypto traders,' even while admitting that 'scams are rampant" in the industry."
Powell fired back at the Attorney General on Twitter this week, saying, “NY is that abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them.”
NY is that abusive, controlling ex you broke up with 3 years ago but they keep stalking you, throwing shade on your new relationships, unable to accept that you have happily moved on and are better off without them. #getoverit https://t.co/DC5S1WyRnp— Jesse Powell (@jespow) September 19, 2018
The report also lamented that it was easy to anonymously trade crypto, with some exchanges, "requiring little more than an email address to begin trading virtual currencies."