Cryptocurrency Exchange

A Cryptocurrency Exchange is essentially a website/app/e-commerce platform that helps cryptocurrency investors, buyers, and sellers to directly or indirectly contact each other to trade, convert, or buy and sell cryptocurrencies.

Trading platforms for stocks, forex, derivatives, commodities, and other financial assets are tightly and strictly regulated. These trading platforms are classified as official exchanges or alternative trading systems. Regardless of classification, these trading platforms must comply with strict regulations designed to protect investors and prevent destabilization of the financial system.

Despite their recent appearance, cryptocurrency exchanges often encounter problems related to security and anti-money laundering. However, the focus of cryptocurrency exchange regulation is now shifting to their core business, trading.

In March 2021, the Commodity Futures Trading Commission (CFCT) fined Coinbase $6.5 million for reckless, misleading or inaccurate reporting and wash trading on its GDAX platform. Other leading cryptocurrency exchanges have also been investigated for their trading, including Bitfinex and Binance.

The original design of bitcoin, the leading cryptocurrency, was to be tradable without going through any exchange, facilitating the trading of bitcoin against other currencies such as the US dollar, British pound, and euro.

However, this trading network was shut down after encountering legal issues. It took 18 months after bitcoin went live for the first independent exchange, bitcoinmarket.com, to launch, allowing bitcoin to be traded against US dollars. Since cryptocurrencies have no value, a cryptocurrency exchange is not only a place to trade cryptocurrencies against other currencies such as US dollars, pounds, euros, but also a place where prices are established with the participation of many different trading parties, just like a regular stock exchange.

Cryptocurrency exchanges are playing an important role in the cryptocurrency ecosystem, but because of the differences between cryptocurrencies and conventional financial assets, understanding how to regulate cryptocurrency exchanges is very important for countries around the world. The remainder of the article will summarize the regulations for the top 16 cryptocurrency exchanges as ranked by cryptocompare.com in early July 2021, including seven that form the BitcoinCME reference price.