The New York State Attorney General's office requested information from 13 cryptocurrency exchanges on Tuesday in an effort to better understand investor risks, a release said.
"Too often, consumers don't have the basic facts they need to assess the fairness, integrity, and security of these trading platforms," Attorney General Eric Schneiderman said in a statement.
"Our Virtual Markets Integrity Initiative sets out to change that, promoting the accountability and transparency in the virtual currency marketplace that investors and consumers deserve."
His office's Investor Protection Bureau sent letters to Coinbase's GDAX exchange, Gemini Trust, bitFlyer and several other global virtual currency trading platforms requesting they complete by May 1 a questionnaire on areas such as ownership, fees, trading suspensions and money laundering.
Terry Roche, head of fintech research at Tabb, expects increased government scrutiny will require cryptocurrency exchanges to operate with greater rigor and transparency, "which will increase cost of operations."
"There will be material changes to this market that should protect the functioning of the market and those investing," Roche said.
Trading cryptocurrencies has become a big business in the last year as the prices of digital assets such as bitcoin have skyrocketed.
Coinbase, the leading U.S.
cryptocurrency marketplace, more than doubled its users in 12 months to more than 13 million at the end of November.
Stock trading app Robinhood and Square's "Cash" payments app have also launched crypto trading features in the last few months.
However, the infrastructure has often fallen short of Wall Street's established stock exchanges. Japanese exchange Coincheck was hacked earlier this year.
Coinbase repeatedly suspended cryptocurrency buys and sells last year as the company struggled to handle high demand, and also surprised markets with a botched rollout of "bitcoin cash" trading.
"Gemini applauds the Attorney General's focus on this industry and the Virtual Markets Initiative, and we look forward to cooperating with and submitting our responses to the questionnaire that has been circulated," Tyler Winklevoss, CEO of Gemini, said in a statement to CNBC.
In March, he and his brother Cameron proposed virtual currency businesses form a self-regulatory organization as a way for the industry to mature.
Other exchanges the New York Attorney General's office contacted include Bitfinex, Bitstamp USA, Kraken, Bittrex, Poloniex parent Circle Internet Financial and Binance.
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The Wall Street Journal first reported the news of the information requests.
"We look forward to working with Attorney General Schneiderman to drive progress in the crypto space and to creating a clear and consistent approach to regulatory framework," a Coinbase spokesperson said in a statement.
Bittrex, Circle, Bitfinex and itBit also shared statements expressing their support for the government inquiry.
Tidex said it does not allow U.S. users but is willing to help with the information request.
BitFlyer USA's Director of Compliance Hailey Lennon said the company has received the letter and is reviewing the requests.
However, Kraken's CEO and co-founder Jesse Powell said Wednesday the exchange will not comply with the attorney general's inquiry, which he said would require too many resources to complete by the May 1 deadline. Powell added he was glad Kraken decided not to get the "BitLicense" needed to operate in New York, so that "we can dodge this bullet."
The four other companies contacted did not respond to a CNBC request for comment.