Opening and legal support of cryptocurrency exchanges
A cryptocurrency exchange is a specialized online service designed to exchange various cryptocurrencies, as well as to exchange cryptocurrencies for fiat money. The exchange of one cryptocurrency for another is possible if the supported financial instruments of the exchange include the corresponding cryptocurrency pair. For example, having a BTC/LTC pair means that you can exchange bitcoins for litecoins. The absence of a pair means that it is impossible to carry out the desired exchange on this exchange. Cryptocurrency exchanges can support the exchange of cryptocurrencies for fiat money and vice versa.
The principle of operation of cryptocurrency exchanges is simple and consists of several stages.
The registration procedure on the cryptocurrency exchange service, in most cases, is similar to the registration procedure on other online services.
Cryptocurrency funds are usually credited free of charge. But for the movement of fiat money, cryptocurrency exchanges often charge a commission. The commission rarely exceeds 8%, but is more often in the range from 1 to 5%. It depends on the method of depositing funds to the account of the cryptocurrency exchange and the commissions of the involved payment systems.
The creation of orders, in other words, orders for the purchase or sale of cryptocurrency for fiat money, as well as orders for the exchange of cryptocurrency funds, starts any trading operation on the exchange. The application sets the price for which the user is ready to buy or sell the desired currency. If there is a willing to carry out a transaction at a specified price, it is concluded. If the price does not correspond to the market, there may not be anyone willing to conclude such a deal.
Fiat and cryptocurrency funds can be withdrawn from the exchange. If it is planned to carry out trading and other operations in the near future, funds can be left on the exchange wallet.
For successful and profitable cryptocurrency trading, you should choose trustworthy, well-established exchanges. They take a responsible approach to information security issues and are reliable partners for working in the financial and cryptocurrency markets.
It is important that users of cryptocurrency exchanges securely store passwords and access keys to their account. On exchange wallets, you should store the optimal amount of funds necessary for conducting trading operations.
Commission is the main source of income for cryptocurrency exchanges. They are interested in both a constant and stable increase in the user base, and in attracting users with large capitals.
Important differences between cryptocurrency exchanges
Cryptocurrency exchanges operate on the basis of a business model traditional for exchange institutions. Really reliable exchanges successfully compete in the market, constantly improve the usability of the service, improve functionality and create new opportunities for their users. Let us formulate the important differences between cryptocurrency exchanges from the point of view of users.
The choice of cryptocurrencies, the presence of cryptocurrency pairs. On some exchanges, only the most popular currencies are traded, on others - tens and hundreds of pairs.
Withdrawal of cryptocurrencies. Somewhere you can withdraw only bitcoin, litecoin and several other well-known currencies, and somewhere - dozens of types of cryptocoins, including not the most popular ones.
Ability to work with fiat money. Some exchanges work only with cryptocurrencies, others can work with fiat just as easily as with cryptocurrencies.
Commission. Most often, the commission for concluding a transaction is charged only from the buyer, sometimes - from both the buyer and the seller. Additional fees may apply.
User data. Some exchanges are limited to a standard email request, while others require a complicated user verification procedure, which may require, for example, passport data.
Account protection. Somewhere, a password is enough to enter the account, and somewhere a two-factor verification procedure is used.
Methods of input-output of funds. On some exchanges, money can only be withdrawn through certain payment systems, while others allow the possibility of a bank transfer or crediting funds directly to payment cards.
Trade volumes. For some cryptocurrency exchanges, they exceed $2 billion per day, while for others they do not even reach $10,000 per month.
Some cryptocurrency exchanges offer additional tools and features:
margin trading and margin financing;
detailed price charts and trading volumes, technical indicators and other trading tools;
interest bearing deposits;
Pay attention to such important points for any user as the language of the interfaces and the availability of round-the-clock technical support. Most cryptocurrency exchanges can communicate in English. Large exchanges seeking to win users in the global market can communicate in many languages, including Russian. Adequate technical support should work all the time while exchange operations are carried out on the exchange.
Risks of cryptocurrency exchanges
In 2018, investors lost more than $700 million due to the hack of two major cryptocurrency exchanges, Italy's BitGrail and Japan's CoinCheck. According to the Wall Street Journal, since 2014 investors in cryptocurrency projects have lost approximately $1.4 billion due to hacker attacks.
Traditional stock and futures exchanges, in fact, organize a meeting of the seller and the buyer for a certain commission. And cryptocurrency exchanges solve another difficult task - the preservation of investors
Virtual wallets of cryptocurrency owners and investment tokens of cryptocurrency exchanges remain the main target of hacker attacks this year as well. Investors acquiring speculative tokens from unregulated exchanges, where a significant portion of trading is in unverified cryptocurrencies, are at additional risk.
Unreliable owners of cryptocurrency exchanges
Users and investors are exposed to the following risks to unreliable owners of cryptocurrency exchanges.
- When crediting fiat or cryptocurrency funds to an account account, the funds are credited to a bank account controlled by the owner of the cryptocurrency exchange.
- Data about users
- The elements of a blockchain exchange wallet, such as the address that is visible to all blockchain users and the key with which transactions are carried out, are also held by the owner of the cryptocurrency exchange.
Please note that a well-formed legal structure of a cryptocurrency exchange serves as an essential guarantee of the trustworthiness of its owners. A strong legal basis is a serious argument in favor of the trustworthiness of a cryptocurrency exchange when choosing an online service for exchanging cryptocurrencies or an investment object.
Legal support for licensing the activities of cryptocurrency exchanges and other cryptocurrency online services
Licenses required for successful work with cryptocurrency projects
Specialized crypto-currency licenses of state bodies for the settlement of crypto-currency exchange operations.
Traditional financial licenses that cover cryptocurrencies, such as in the US or Hong Kong.