Crypto Exchanges

Can We Trust Crypto Exchanges? Read On To Find Out!

Trust is like a double-edged sword and especially in the field of cryptocurrency industry, trust can land you into trouble unless you are wise enough. So, how exactly do regulations play a part in crypto exchanges? Well, it doesn’t matter if you are a beginner or a professional trader you need to be aware of the multifaceted aspects of the Crypto Exchanges if you want to play safe!

SEC or the Security Exchange Commission fined a sum of $388,000 against Ether Delta for having operated under undocumented security exchanges. They have also reportedly charged a bitcoin-funded exchange for having failed to obtain a license and for violating the KYC laws. These interventions are clearly an indication that regulations are going to be imposed on crypto exchanges which largely went unsupervised. But in spite of such implementations, there have been reports of cases for spoofing and other uncanny schemes.

The Delays

There is indeed a delay in such implementations but why is there a delay overall? This was somewhat explained by the authorities that are well versed with crypto issues and its legalities. That explanation cites that there is a lack of any agency with an authority over these crypto-exchanges. There is apparently no authority that is shared on the same light as it would with other exchange derivatives.

There are no functional regulations that would affect such exchanges. Even for agencies to process such exchanges, they’d need some cold hard data pertaining to the trades happening, showing all the logs of entry and exit. They are yet to obtain such data for the regulations to even happen. SEC somewhat has the power to run such exchanges under their wing but the crypto market is hard to step right in unlike their jurisdiction over NY stocks.

The exchanges such as Gemini and Coinbase are seeking the likeliness of regulators to the best of their abilities. While the regulators are focused on exchanges, OTC or over the counter markets such as Circle and Cumberland mining are flourishing. These markets are obviously not accessible to the retail side but they are receiving large trading volumes. These obviously have garnered a lot of attention from conventional investors which will likely put regulatory pressure. But till then, it’s highly likely that it won’t be reaching the masses anytime soon.

Centralized Cryptocurrency Exchanges: Trading Smartly

To put it in simpler terms, a centralized cryptocurrency exchange is a platform online where traders can buy and sell cryptocurrencies with the help of fiat or crypto pairing. (buying/selling of other digital currency with another variant of the same can also take place).

This platform has garnered a healthy amount of popularity amongst the traders since it has a lot of advantages. It receives support and approval amongst the traders even though it still is in its nascent stage and is not quite popular. But it is important to understand the fundamental differences between centralized and de-centralized exchanges. Even though blockchain technology and crypto exchanges have been known for their default nature of exchange which has primarily been decentralized, but there are similar centralized exchanges like that of the US dollar. So, the peer to peer exchanges (decentralized) provides a direct channel between the traders and sellers. This way of exchange has cut down the use of any escrow services.

The key features of centralized cryptocurrency exchanges are cited below:

  • A centralized cryptocurrency exchange has a formal structure where a middle man is appointed to handle your money.
  • There is no guarantee of safety since centralized exchanges are also vulnerable to hackings. Many such events have been witnessed but some of them like DEX, on the other hand, are much safer since they are harder to hack in.
  • Centralized platforms offer crypto pairing which means that you can exchange BTC for ETH. But such pairings are available for certain exchanges like Kraken, Gemini, and Coinbase.

Some of the well-known crypto exchanges right now are:

It is a sister company to Coinbase which is one of the most popular exchanges in the world. This exchange is not well suited for the ones who are starting out since it deals with sophisticated dealings and professional traders.

Binance is a Hong Kong-based exchange which was launched in the year 2017 and currently boasts the highest daily volume of exchanges. It has garnered massive traction within a short span of time after it raided funds through an ICO.

This is one of the top exchanges for Bitcoins. What makes this one so exceptional is the fact that here you can trade on any type of coins. This is what gives it the feel of a well-developed exchange that handles huge transactions on a daily basis. Also, the 0.25% trading fee and free withdrawals except for the transaction fee keep them at the top of the list!

Having almost 50,000 members right now, this one can be said to be the most trusted exchange for the crypto traders. Poloniex offers flat 0.2% trading fees, while both the deposit and the withdrawal fee depend solely on the respective blockchain’s transaction fee.

The first exchange to allow purchase through credit cards, this one is still not available in all countries. In case you are wondering, the trading fee is $0.25.

With headquarters at the British Virgin Islands, this one has made a name in the industry due to their varying roles as margin trading exchange, liquidity provider and bitcoin to USD exchange. They deal with multiple cryptos so traders have ample options.


With a trading fee ranging within 0.05% and 0.75%, this exchange deals in selling and trading between bitcoins and US Dollars, Euros, Canadian Dollars, Japanese Yen and British Pounds. Margin trading accounts leveraging and many other features make this one quite popular among traders. Also, two-factor authentication means the security level is quite high.

To surmise, centralized crypto exchanges do enjoy the legalities and regulations which make it easier to hold someone accountable. They are also quite easy to use and have more fluidity to it. But unfortunately, these exchanges are not immune to hacking.

Let’s Take A Look At Some Of The Recent Worst Scams:

When there is money involved, how can one not expect scams? These are obviously not to incite negativity in your enthusiasm but they will likely give you some reality checks about crypto exchanges.

1. A Miami based business declared bankruptcy and disappeared without a trail, leaving behind an electricity bill of over 1.5$ million. They did pay their rent but the mining was obviously unnoticed.

2. Hackers somehow managed to break into one of the most used traffic analytic services, StatCounter. After getting access to their code, the hackers could infect as many sites as possible which amounted to over 680,000. The malicious code that they injected smartly could generate Bitcoin addresses each time it ran.

3. With a joint investigation launched by McAfee and Inskip, they unearthed some of the cases pertaining to bitcoin fueled ransom scheme. Then, the hackers would provide an up-to-date version of the malware upon payment of 50$ and once installed, it could encrypt all the contents of your PC. For that to open, they would demand a bitcoin ransom.

4. 2019 saw one of the biggest scams in a crypto exchange where almost 16$ million in Ethereum and ERC20 tokens were stolen. This particular case is under close inspection by the NewZealand authorities and specialist from around the world. The Cryptopia hack was previously thought to have cost 3.2$ million, but the eventual loss amounted to 16$ million.

These are obviously quite debilitating to digest at one go. But with 4 bad cases, there are many more good exchanges that occur. As long as you are well versed with the trade, the Ponzi-schemes would seem apparent. Even though it is digital, it is very important for the traders to keep their senses open before trading and buying. It is an unexpected and nascent market after all.

Caleb Lombardo
Caleb Lombardo
Caleb is an experienced cryptocurrency analyst, day-trader, and enthusiast. Since 2015, Caleb has been involved in various cryptocurrency projects as an advisor and executive. His passion for cryptocurrency and blockchain technology led him to the acquisition of Stackzea.