It is requesting information from 13 exchanges about the use of bots, outages, consumer protections, and other issues.
New York Attorney General Eric Schneiderman is looking to add transparency to the opaque market for digital currency.
Schneiderman's office has sent out letters to 13 cryptocurrency exchange operators on Tuesday as part of his broader crypto fact-finding mission aimed at protecting investors in the nascent market for digital coins. His office is requesting information from crypto exchanges about the use of bots, outages, consumer protection, and other issues.
Cryptocurrency exchanges that received letters include New York-based Gemini and Coinbase's GDAX.
"As the letters explain, the Initiative seeks to increase transparency and accountability as it relates to the platforms retail investors rely on to trade virtual currency, and better inform enforcement agencies, investors, and consumers," a news release said.
Crypto exchanges have been prone to hacks and outages and do not subscribe to the same regulatory mandates as well-established equity exchanges such as the New York Stock Exchange and Nasdaq.
In a wide-ranging note on blockchain and bitcoin by JPMorgan, the firm notes "it is estimated that a third of bitcoin trading platforms have been hacked and these cyber theft/hackers took over $630 million in bitcoins."
Outages have also been commonplace. As the market for digital currencies soared at the end of 2017, customers at exchanges including US-based Kraken and Coinbase were frequently unable to access or move their crypto holdings.
Peter Van Valkenburgh, a cryptocurrency trade organization, said the inquiry shows the extent to which the crypto market, which is often referred to as a Wild West, is regulated.
"Far from being unregulated, these businesses must contend with state money transmission licensing laws, federal anti-money laundering law, CFTC scrutiny for commodities spot market manipulation, SEC scrutiny for securities trading (should any tokens traded be securities), and in this case state consumer protection investigations from the several attorneys general," Van Valkenburgh said.
Schneiderman is requesting the information by May 1, and his office plans to publish its findings.