EATS SHOOTS AND LEAVES V2: REGULATION OF CRYPTOCURRENCY EXCHANGES

EATS SHOOTS AND LEAVES V2: REGULATION OF CRYPTOCURRENCY EXCHANGES

Exchanges as institutions for financial and commercial transactions are as old as the hills. However, the emergence of virtual currencies, virtual assets or goods (call the crypto currency as you think is correct) filled the virtual world with a new type of exchange platforms – crypto exchanges.

Today, there are many virtual platforms ready to save you from bothering your head about where to buy bitcoin, how to exchange it for conditional N-coin or fiat currencies. Crypto exchanges are what a trader, an investor, and maybe even a public official, who wants to hide his unearned income, need. On the Internet, you can find crypto exchange platforms for every taste and pocket. The most famous and reliable platforms include Binance, Bitfinex, Bittrex, Kraken, etc. Everything is fine. BUT! Based on the amount of dubious information about the imminent ban of cryptocurrency, the activity of exchanges and many other necessary and pleasant things, this issue is becoming less clear.

Cryptocurrency Exchanges are Legal (as well as Bitcoin and Ice-Cream)

Countries having no direct prohibitions on crypto-currency transactions, usually do not have such prohibitions on crypto exchanges, or services they provide. The lack of opportunity to use the services of some exchanges in some jurisdictions is very often connected not with the prohibition of the crypt or exchange, but with the rules of the latter, which often does not want to cooperate with residents of states on different sanctions lists (Afghanistan, Zimbabwe … not to offend feelings of some people, we will limit ourselves to such a list). Problems can arise for due to some other, sometimes reasonable, sometimes not, causes, but certainly not because of the illegality of crypto.

The existence of a certain legal regulation of the activities of cryptoexchanges does not mean that the state, in whose jurisdiction the legal entity having the exchange is registered, is taking measures to prohibit it. Moreover, if we discard certain legislative issues that really make the operation of crypto exchanges not so simple as some would like, then the existence of legal regulation in the sphere of turnover of crypto currency means that the cryptocurrency activity is unequivocally legitimate.

Licensing of Crypto Exchanges

The fact that we can use crypto exchange services almost anywhere in the world does not mean that these exchanges exist only in the virtual world. In fact, behind each stock exchange there is a certain legal entity registered where it was deemed necessary by its founders.

On the Internet, you can find various ratings and top lists of crypto currency exchanges (such ratings, perhaps, outnumber exchanges themselves). We will offer you a list of the most popular crypto currency exchanges, which is not at all a rating or a top, but is designed to answer the question of where they are located.

  • Kraken – USA, San Francisco;
  • Poloniex – USA, Deliver;
  • Binance – Hong Kong;
  • BTC-e (Wex) – United Kingdom;
  • BitFlyer – Japan;
  • Quoine – Singapore.

The list is far from being complete, since the information about the place of registration of some exchanges is difficult to access, and perhaps is hidden. The information on the jurisdiction of the well-known Bitfinex exchange is very ambiguous. On its website in the “Terms of Service” section you can read that all possible disputes with it are under the exclusive jurisdiction of the courts of the British Virgin Islands. However, there is no information that the entity BFXNA Inc. is registered there.

When choosing a crypto exchange, pay attention to its jurisdiction to know which country’s legislation the rules of this exchange should be complied with. This, at least, will save your nerves during your next reading through the battlefield news for the freedom of cryptocurrency.

Why Should the State Regulate Crypto Market?

The regulation of crypto exchange activities is not directed against bitcoin or another cryptocurrency, but against potential criminals.

Licensing of the activities of crypto exchange platforms is mandatory for two reasons:

  1. Cryptocurrency exchanges provide financial services.
  2. The market of cryptocurrencies creates great opportunities for money laundering and terrorism financing.

The conditions for obtaining a license for stock exchanges have their own peculiarities, depending on the jurisdiction, but in general they consist of rules that prevent their use for money laundering, terrorism financing, fraud and tax evasion, namely:

  • mandatory verification and registration of the client;
  • functioning of the control and audit system;
  • existence of a secure data processing system;
  • fixing suspicious transactions with large amounts of money;
  • sending reports on suspicious transactions to regulatory authorities, etc.

The ban of cryptocurrency in India, South Korea, and China

When it comes to the ban of cryptocurrency, in fact it turns out that the government of a certain country is taking actions to expand the list of licensing requirements or to supplement the list of necessary conditions for legal activity in the market of cryptocurrencies.

Thus, the Chinese government announced the introduction of additional rules, which should be followed by exchanges. Such rules imply minimizing the anonymity of the crypto exchange clients, which will ensure the inevitability of punishment for those who decided to use the crypto currency for criminal purposes.

Similar legislation is being developed in South Korea. It is aimed at providing transparency of the operation of exchanges by increasing the requirements for the identification of persons using their services.

Such rules certainly impose additional duties and expenses on crypto exchanges, which explains their dissatisfaction. Toughening the rules for rendering financial services in crypto exchanges will not please those who are targets of such tightening.

Pay Taxes and Be Calm

Investors and traders who want to legally enrich themselves with the help of the cryptocurrency market should not be afraid of state regulation of the activities of their favorite crypto exchanges. Of course, compliance with regulatory rules on the part of exchanges and their customers will lead to some discomfort associated with minimizing the level of anonymity and a certain increase in commissions for the services of the exchange. However, in return we get additional protection from fraudulent schemes.

The CryptoInfoBase team stands for white trading and white investment in cryptocurrencies. In this regard, we are interested in the AML Bitcoin project, with which you can familiarize yourself by clicking on this link.