cryptocurrency exchange

{{Short description|Trading exchange for crypto- and digital currencies}}

A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.

Some brokerages which also focus on other assets such as stocks, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets while dedicated cryptocurrency exchanges do allow cryptocurrency withdrawals.

Operation

A cryptocurrency exchange can typically send cryptocurrency to a user's personal cryptocurrency wallet. Some can convert digital currency balances into anonymous prepaid cards which can be used to withdraw funds from ATMs worldwide{{Cite web |date=June 2008 |title=Substantiation – Money laundering in digital currencies (Unclassified) |url=https://www.justice.gov/archive/ndic/pubs28/28675/sub.htm |access-date=11 January 2014 |website=Money Laundering in Digital Currencies |publisher=National Drug Intelligence Center, US Department of Justice |archive-date=14 April 2022 |archive-url=https://web.archive.org/web/20220414172712/https://www.justice.gov/archive/ndic/pubs28/28675/sub.htm |url-status=live }}{{Cite journal |last1=Sood |first1=Aditya K |last2=Enbody |first2=Richard J |last3=Bansal |first3=Rohit |year=2013 |title=Cybercrime: Dissecting the State of Underground Enterprise |pages=60–68 |journal=IEEE Internet Computing |volume=17 |publisher=IEEE Computer Society |issue=1 |doi=10.1109/MIC.2012.61|s2cid=33861214 }} while other digital currencies are backed by real-world commodities such as gold.{{Cite book |last1=Byrnes |first1=William H. |url=https://books.google.com/books?id=cVLUdo4JQv4C&pg=PP2802 |title=Money Laundering, Asset Forfeiture and Recovery and Compliance – A Global Guide |last2=Munro |first2=Robert J. |date=2 October 2013 |publisher=LexisNexis |isbn=978-0-327-17084-6 |page=2802}} (Page number assigned by Google Books.)

The creators of digital currencies are typically independent of the digital currency exchange that facilitate trading in the currency. In one type of system, digital currency providers (DCP) are businesses that keep and administer accounts for their customers, but generally do not issue digital currency to those customers directly. Customers buy or sell digital currency from digital currency exchanges, who transfer the digital currency into or out of the customer's DCP account. Some exchanges are subsidiaries of DCP, but many are legally independent businesses. The denomination of funds kept in DCP accounts may be of a real or fictitious currency.

A digital currency exchange can be a brick-and-mortar business or a strictly online business. As a brick-and-mortar business, it exchanges traditional payment methods and digital currencies. As an online business, it exchanges electronically transferred money and digital currencies.{{Cite journal |last=Working Group on Typologies |date=18 October 2010 |title=Draft Report on Money Laundering and Terrorist Financing through New Payment Methods |url=http://www.secp.gov.pk/IACCD/pub_iaccd/AML/MONEY%20LAUNDERING%20&%20TERRORIST%20FINANCING%20VULNERABILITIES%20OF%20COMMERCIAL%20WEBSITES%20AND%20INTERNET%20PAYMENT%20SYSTEMS.pdf |url-status=dead |location=Paris |publisher=Financial Action Task Force |archive-url=https://web.archive.org/web/20140211235106/http://www.secp.gov.pk/IACCD/pub_iaccd/AML/MONEY%20LAUNDERING%20%26%20TERRORIST%20FINANCING%20VULNERABILITIES%20OF%20COMMERCIAL%20WEBSITES%20AND%20INTERNET%20PAYMENT%20SYSTEMS.pdf |archive-date=11 February 2014}}

Often, the digital currency exchanges operate outside the Western countries to avoid regulation and prosecution. However, they do handle Western fiat currencies and maintain bank accounts in several countries to facilitate deposits in various national currencies.

Decentralized exchanges such as Etherdelta, IDEX and HADAX do not store users' funds on the exchange, but instead facilitate peer-to-peer cryptocurrency trading. Decentralized exchanges are resistant to security problems that affect other exchanges, but {{Asof|2018|pre=mid|lc=yes}} suffer from low trading volumes.{{Cite news |last1=Russolillo |first1=Steven |last2=Jeong |first2=Eun-Young |date=2018-07-16 |title=Cryptocurrency Exchanges Are Getting Hacked Because It's Easy |language=en-US |work=The Wall Street Journal |url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000 |access-date=2018-09-11 |issn=0099-9660 |archive-date=11 September 2018 |archive-url=https://web.archive.org/web/20180911094757/https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000 |url-status=live }}

History

= 2004–2008 Pre crypto regulatory issues =

In 2004 three Australian-based digital currency exchange businesses voluntarily shut down following an investigation by the Australian Securities and Investments Commission (ASIC). The ASIC viewed the services offered as legally requiring an Australian Financial Services License, which the companies lacked.{{Cite press release |title=ASIC acts to shut down electronic currency trading websites |date=9 November 2004 |publisher=Australian Securities & Investments Commission |url=http://www.asic.gov.au/asic/asic.nsf/byheadline/04-366+ASIC+acts+to+shut+down+electronic+currency+trading+websites?openDocument |access-date=9 January 2014 |archive-url=https://web.archive.org/web/20110323142630/http://www.asic.gov.au/asic/asic.nsf/byheadline/04-366+ASIC+acts+to+shut+down+electronic+currency+trading+websites?openDocument |archive-date=23 March 2011}}

In 2006, U.S.-based digital currency exchange business Gold Age Inc., a New York state business, was shut down by the U.S. Secret Service after operating since 2002.{{Cite magazine |last=McCullagh |first=Declan |date=30 March 2001 |title=Secret service raids Gold-Age |magazine=Wired |url=https://www.wired.com/politics/law/news/2001/03/42745 |access-date=9 January 2014}} Business operators Arthur Budovsky and Vladimir Kats were indicted "on charges of operating an illegal digital currency exchange and money transmittal business" from their apartments, transmitting more than $30 million to digital currency accounts. Customers provided limited identity documentation, and could transfer funds to anyone worldwide, with fees sometimes exceeding $100,000.{{Cite book |last=Hesterman |first=Jennifer L |url=https://books.google.com/books?id=pX5uOpcXkdgC&pg=PA218 |title=The Terrorist-Criminal Nexus: An Alliance of International Drug Cartels, Organized Crime, and Terror Groups |date=17 April 2013 |publisher=CRC Press |isbn=978-1-4665-5761-1 |page=218}} Budovsky and Kats were sentenced in 2007 to five years in prison "for engaging in the business of transmitting money without a license, a felony violation of state banking law", ultimately receiving sentences of five years' probation.{{Cite news |last1=Boddiger |first1=David |last2=Arias |first2=L |date=24 May 2013 |title=Millions of dollars in limbo after shuttering of digital currency site Liberty Reserve |work=The Tico Times |location=San José, Costa Rica |url=http://www.ticotimes.net/More-news/News-Briefs/Millions-of-dollars-in-limbo-after-shuttering-of-digital-currency-site-Liberty-Reserve-_Saturday-May-25-2013 |url-status=dead |access-date=9 January 2014 |archive-url=https://web.archive.org/web/20131231234813/http://www.ticotimes.net/More-news/News-Briefs/Millions-of-dollars-in-limbo-after-shuttering-of-digital-currency-site-Liberty-Reserve-_Saturday-May-25-2013 |archive-date=31 December 2013}}

In April 2007, the U.S. government ordered E-Gold administration to lock/block approximately 58 E-Gold accounts owned and used by The Bullion Exchange, AnyGoldNow, IceGold, GitGold, The Denver Gold Exchange, GoldPouch Express, 1MDC (a Digital Gold Currency, based on e-gold) and others, forcing G&SR (owner of OmniPay) to liquidate the seized assets.{{fact|date=January 2024}}

A few weeks later, E-Gold faced four indictments.{{Cite web |date=24 April 2007 |title=#07-301: 04-27-07 Digital Currency Business E-Gold Indicted for Money Laundering and Illegal Money Transmitting |url=http://www.usdoj.gov/opa/pr/2007/April/07_crm_301.html |access-date=11 December 2013 |publisher=Usdoj.gov |archive-date=29 April 2007 |archive-url=https://web.archive.org/web/20070429013908/http://www.usdoj.gov/opa/pr/2007/April/07_crm_301.html |url-status=live }}

=2008–2014 advent of crypto currency=

Following the launch of a decentralized cryptocurrency bitcoin in 2008 and the subsequent introduction of other cryptocurrencies, many virtual platforms were created specifically for the exchange of decentralized cryptocurrencies. Their regulation differs from country to country.

In July 2008, WebMoney changed its rules, affecting many exchanges. Since that time it became prohibited{{by whom|date=November 2016}} to exchange WebMoney to the most popular e-currencies like E-gold, Liberty Reserve and others.

Also in July 2008 E-gold's three directors accepted a bargain with the prosecutors and pleaded guilty to one count of "conspiracy to engage in money laundering" and one count of the "operation of an unlicensed money transmitting business".{{Cite news |last=Grant Gross |date=22 July 2007 |title=IDG News Service Internet currency firm pleads guilty to money laundering |url=http://www.thestandard.com/news/2008/07/22/internet-currency-firm-pleads-guilty-money-laundering |archive-url=https://web.archive.org/web/20090414185759/http://www.thestandard.com/news/2008/07/22/internet-currency-firm-pleads-guilty-money-laundering |archive-date=14 April 2009}} E-gold ceased operations in 2009.

In 2013, Jean-Loup Richet, a research fellow at ESSEC ISIS, surveyed new money laundering techniques that cybercriminals were using in a report written for the United Nations Office on Drugs and Crime.{{Cite arXiv |eprint=1310.2368 |class=cs.CY |author=Richet, Jean-Loup |title=Laundering Money Online: a review of cybercriminals methods |date=June 2013}} A common approach to cyber money laundering was to use a digital currency exchanger service which converted dollars into Liberty Reserve and could be sent and received anonymously. The receiver could convert the Liberty Reserve currency back into cash for a small fee. In May 2013, digital currency exchanger Liberty Reserve was shut down after the alleged founder, Arthur Budovsky Belanchuk, and four others were arrested in Costa Rica, Spain, and New York "under charges for conspiracy to commit money laundering and conspiracy and operation of an unlicensed money transmitting business." Budovsky, a former U.S. citizen and naturalized Costa Rican, was convicted in connection with the 2006 Gold Age raid. More than $40 million in assets were placed under restraint pending forfeiture, and more than 30 Liberty Reserve exchanger domain names were seized.{{Cite news |title=Digital currency biz Liberty Reserve shut down, founder arrested | by Sean Ludwig |work=VentureBeat |url=https://venturebeat.com/2013/05/26/liberty-reserve-shut-down/ |access-date=11 December 2013 |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022045/https://venturebeat.com/2013/05/26/liberty-reserve-shut-down/ |url-status=live }} The company was estimated to have laundered $6 billion in criminal proceeds.{{Cite web |date=18 November 2013 |title=Written testimony of U.S. Secret Service for a Senate Committee on Homeland Security and Government Affairs hearing titled "Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies" |url=https://www.dhs.gov/news/2013/11/18/written-testimony-us-secret-service-senate-committee-homeland-security-and |access-date=11 January 2014 |publisher=United States Department of Homeland Security |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022045/https://www.dhs.gov/news/2013/11/18/written-testimony-us-secret-service-senate-committee-homeland-security-and |url-status=live }}

= 2014 to present =

In February 2014, Mt. Gox, the largest cryptocurrency exchange at the time, suspended trading, closed its website and exchange service, and filed for bankruptcy protection in Japan from creditors.{{Cite news |last=McLannahan |first=Ben |date=28 February 2014 |title=Bitcoin exchange Mt Gox files for bankruptcy protection |work=Financial Times |url=http://www.ft.com/intl/cms/s/0/6636e0e8-a06e-11e3-a72c-00144feab7de.html |access-date=11 June 2018 |archive-date=3 April 2022 |archive-url=https://web.archive.org/web/20220403194648/https://www.ft.com/content/6636e0e8-a06e-11e3-a72c-00144feab7de |url-status=live }}{{Cite news |last1=Abrams |first1=Rachel |last2=Goldstein |first2=Matthew |last3=Tabuchi |first3=Hiroko |author-link=Hiroko Tabuchi |date=28 February 2014 |title=Erosion of Faith Was Death Knell for Mt. Gox |work=The New York Times |url=https://dealbook.nytimes.com/2014/02/28/mt-gox-files-for-bankruptcy/ |access-date=11 June 2018 |archive-date=16 February 2022 |archive-url=https://web.archive.org/web/20220216104407/https://dealbook.nytimes.com/2014/02/28/mt-gox-files-for-bankruptcy/ |url-status=live }} In April 2014, the company began liquidation proceedings.{{Cite web |title=Mt. Gox abandons rebuilding plans and files for liquidation: WSJ |url=https://www.theverge.com/2014/4/16/5619636/mt-gox-asks-for-permission-to-liquidate |access-date=9 December 2017 |website=The Verge |date=16 April 2014 |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022045/https://www.theverge.com/2014/4/16/5619636/mt-gox-asks-for-permission-to-liquidate |url-status=live }} This was the result of a large theft of bitcoins that were stolen straight out of the Mt. Gox hot wallet over time, beginning in late 2011.{{Cite web |last=Nilsson |first=Kim |date=19 April 2015 |title=The missing MtGox bitcoins |url=http://blog.wizsec.jp/2015/04/the-missing-mtgox-bitcoins.html |access-date=10 December 2015 |quote=Most or all of the missing bitcoins were stolen straight out of the Mt. Gox hot wallet over time, beginning in late 2011 |archive-date=19 April 2015 |archive-url=https://web.archive.org/web/20150419115912/http://blog.wizsec.jp/2015/04/the-missing-mtgox-bitcoins.html |url-status=live }}{{Cite web |last=Popper |first=Nathaniel |date=25 May 2016 |title=Mt. Gox Creditors Seek Trillions Where There Are Only Millions |url=https://www.nytimes.com/2016/05/26/business/dealbook/mt-gox-creditors-seek-trillions-where-there-are-only-millions.html |access-date=9 December 2017 |website=The New York Times |archive-date=5 July 2022 |archive-url=https://web.archive.org/web/20220705194042/https://www.nytimes.com/2016/05/26/business/dealbook/mt-gox-creditors-seek-trillions-where-there-are-only-millions.html |url-status=live }}

In December 2021 the MyCryptoWallet exchange called in liquidators.{{cite news |last1=Whitson |first1=Rhiana |title=Cryptocurrency exchange MyCryptoWallet collapses, calls in liquidators |url=https://www.abc.net.au/news/2021-12-07/mycryptowallet-collapse-liquidation-jaryd-koenigsmann/100679200 |access-date=7 December 2021 |work=ABC News |publisher=Australian Broadcasting Corporation |date=7 December 2021 |language=en-AU |archive-date=7 December 2021 |archive-url=https://web.archive.org/web/20211207014227/https://www.abc.net.au/news/2021-12-07/mycryptowallet-collapse-liquidation-jaryd-koenigsmann/100679200 |url-status=live }}

In June 2022, the US Securities and Exchange Commission launched an enquiry into Binance as an entity and not into the crypto products it was dealing in.{{cite news |title=Binance.US Delists Cryptocurrency SEC Deemed A Security |url=https://www.forbes.com/sites/ninabambysheva/2022/08/02/binanceus-delists-cryptocurrency-sec-deemed-a-security/?sh=76d18a314ac2 |date=2 August 2022 |website=Forbes |access-date=20 November 2022 |archive-date=20 November 2022 |archive-url=https://web.archive.org/web/20221120014220/https://www.forbes.com/sites/ninabambysheva/2022/08/02/binanceus-delists-cryptocurrency-sec-deemed-a-security/?sh=76d18a314ac2 |url-status=live }}

On 11 November 2022, FTX, which was at that time the third largest cryptocurrency exchange by volume and valued at $18 billion,{{Cite news|last=Osipovich|first=Alexander|date=20 July 2017|title=Crypto Exchange FTX Valued at $18 Billion in Funding Round|language=en-US|work=The Wall Street Journal|url=https://www.wsj.com/articles/crypto-exchange-ftx-valued-at-18-billion-in-funding-round-11626800455|access-date=28 December 2022|issn=0099-9660|archive-date=18 November 2022|archive-url=https://web.archive.org/web/20221118075444/https://www.wsj.com/articles/crypto-exchange-ftx-valued-at-18-billion-in-funding-round-11626800455|url-status=live}} entered bankruptcy proceedings in the US court system, following what the exchange termed as "a liquidity crisis".{{cite web|url=https://www.nytimes.com/2022/11/11/business/ftx-bankruptcy.html|title=Embattled Crypto Exchange FTX Files for Bankruptcy|website=New York Times|url-access=subscription|date=11 November 2022|author=David Yaffe-Bellany|access-date=11 November 2022|archive-date=11 November 2022|archive-url=https://web.archive.org/web/20221111143841/https://www.nytimes.com/2022/11/11/business/ftx-bankruptcy.html|url-status=live}}{{cite news |last1=Hill |first1=Jeremy |title=FTX Goes Bankrupt in Stunning Reversal for Crypto Exchange |url=https://www.bloomberg.com/news/articles/2022-11-11/ftx-com-goes-bankrupt-in-stunning-reversal-for-crypto-exchange |access-date=28 December 2022 |work=Bloomberg News |date=11 November 2022 |archive-date=11 November 2022 |archive-url=https://web.archive.org/web/20221111143533/https://www.bloomberg.com/news/articles/2022-11-11/ftx-com-goes-bankrupt-in-stunning-reversal-for-crypto-exchange |url-status=live }}{{cite news |last1=Ostroff |first1=Caitlin |last2=Ge Huang |first2=Vicky |last3=Gladstone |first3=Alexander |title=FTX Files for Bankruptcy; Sam Bankman-Fried Steps Down as CEO |url=https://www.wsj.com/articles/ftx-files-for-chapter-11-bankruptcy-11668176869 |access-date=11 November 2022 |work=The Wall Street Journal |date=11 November 2022 |archive-date=11 November 2022 |archive-url=https://web.archive.org/web/20221111143156/https://www.wsj.com/articles/ftx-files-for-chapter-11-bankruptcy-11668176869 |url-status=live }}{{Cite web |last=Macheel |first=Tanaya |title=Bitcoin briefly touches a new low for the year, FTX token plunges more than 75% in broad crypto sell-off |url=https://www.cnbc.com/2022/11/08/cryptocurrencies-slide-as-worries-about-ftx-fester-in-latest-crypto-liquidity-scare.html |access-date=2022-11-18 |website=CNBC |date=8 November 2022 |language=en |archive-date=8 November 2022 |archive-url=https://web.archive.org/web/20221108150827/https://www.cnbc.com/2022/11/08/cryptocurrencies-slide-as-worries-about-ftx-fester-in-latest-crypto-liquidity-scare.html |url-status=live }} The financial impact of the collapse extended beyond the immediate FTX customer base, as reported,{{cite magazine |last1= Khalili|first1=Joel |title=The Fallout of the FTX Collapse|url=https://www.wired.com/story/the-fallout-of-the-ftx-collapse/|access-date=28 December 2022|magazine=Wired |date=11 November 2022}} while, at a Reuters conference, financial industry executives said that "regulators must step in to protect crypto investors."{{cite news|last1=Chatterjee|first1=Sumeet|last2=Davies|first2=Megan|last3=Aftab|first3=Ahmed|last4=McCrank|first4=John|last5=Nguyen|first5=Lananh|last6=Howcroft|first6=Elizabeth|last7=Azhar|first7=Saeed|last8=Sinclair Foley|first8=John|title=After FTX collapse, pressure builds for tougher crypto rules|url=https://www.reuters.com/business/finance/after-ftx-collapse-pressure-builds-tougher-crypto-rules-2022-12-02/|access-date=28 December 2022|work=Reuters|date=2 December 2022|archive-date=28 December 2022|archive-url=https://web.archive.org/web/20221228173516/https://www.reuters.com/business/finance/after-ftx-collapse-pressure-builds-tougher-crypto-rules-2022-12-02/|url-status=live}} Technology analyst Avivah Litan commented on the cryptocurrency ecosystem that "everything...needs to improve dramatically in terms of user experience, controls, safety, [and] customer service."{{cite news|last1=Wile|first1=Rob|title=After FTX's spectacular collapse, where does crypto go from here?|url=https://www.nbcnews.com/business/business-news/cryptocurrency-2023-predictions-bitcoin-ftx-collapse-sam-bankman-fried-rcna61548|access-date=28 December 2022|work=NBC News|date=28 December 2022|archive-date=28 December 2022|archive-url=https://web.archive.org/web/20221228150920/https://www.nbcnews.com/business/business-news/cryptocurrency-2023-predictions-bitcoin-ftx-collapse-sam-bankman-fried-rcna61548|url-status=live}} On 13 December 2022, FTX founder and CEO Sam Bankman-Fried, after being extradited from the Bahamas, was charged by the US attorney’s office for the southern district of New York with fraud, conspiracy to commit money laundering, and conspiracy to defraud the US and violate campaign finance laws.{{cite news|last1=Rushe|first1=Dominic|last2=Kari|first2=Paul|last3=Hern|first3=Alex|last4=Helmore|first4=Edward|title=FTX founder Sam Bankman-Fried charged with defrauding investors|url=https://www.theguardian.com/technology/2022/dec/13/sam-bankman-fried-ftx-charged-sec-crypto-exchange|access-date=31 December 2022|work=The Guardian|date=28 December 2022|archive-date=31 December 2022|archive-url=https://web.archive.org/web/20221231095147/https://www.theguardian.com/technology/2022/dec/13/sam-bankman-fried-ftx-charged-sec-crypto-exchange|url-status=live}}

Examples

In early 2018, Bloomberg News reported the largest cryptocurrency exchanges based on the volume and estimated revenues data collected by CoinMarketCap.{{Cite news |last=Russo |first=Camila |date=5 March 2018 |title=Crypto Exchanges Are Raking in Billions of Dollars |publisher=Bloomberg |url=https://www.bloomberg.com/news/articles/2018-03-05/crypto-exchanges-raking-in-billions-emerge-as-kings-of-coins |access-date=10 June 2018 |archive-date=29 April 2022 |archive-url=https://web.archive.org/web/20220429194433/https://www.bloomberg.com/news/articles/2018-03-05/crypto-exchanges-raking-in-billions-emerge-as-kings-of-coins |url-status=live }} Similar statistics was reported on Statista in a survey by Encrybit to understand cryptocurrency exchange problems. According to the survey, the top three cryptocurrency exchanges are:

Other data points in the survey included the problems that cryptocurrency traders experience with cryptocurrency exchanges and the expectation of traders. Security and high trading fees are the top concerns.{{Cite web |title=Traders: biggest problems of cryptoexchanges 2018 {{!}} Statistic |url=https://www.statista.com/statistics/596462/biggest-problems-cryptoexchanges/ |access-date=2018-09-03 |website=Statista |language=en |archive-date=12 April 2022 |archive-url=https://web.archive.org/web/20220412121906/https://www.statista.com/statistics/596462/biggest-problems-cryptoexchanges/ |url-status=live }}{{Cite web |title=Expectations of traders from cryptocurrency exchanges 2018 {{!}} Statistic |url=https://www.statista.com/statistics/864797/expectations-of-traders-cryptocurrency-exchanges/ |access-date=2018-09-03 |website=Statista |language=en |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022046/https://www.statista.com/statistics/864797/expectations-of-traders-cryptocurrency-exchanges/ |url-status=live }} The exchanges are all fairly new and privately held. Several do not report basic information such as the names of the owners, financial data, or even the location of the business.{{Cite web |title=Leading cryptocurrency exchanges according to traders 2018 {{!}} Statistic |url=https://www.statista.com/statistics/864738/leading-cryptocurrency-exchanges-traders/ |access-date=2018-09-02 |website=Statista |language=en |archive-date=29 June 2022 |archive-url=https://web.archive.org/web/20220629152631/https://www.statista.com/statistics/864738/leading-cryptocurrency-exchanges-traders/ |url-status=live }}

Legislation

By 2016, several cryptocurrency exchanges operating in the European Union obtained licenses under the EU Payment Services Directive and the EU Electronic Money Directive.{{Cite web |date=4 July 2016 |title=Bitcoin firm bags first electronic money licence in the UK |url=https://arstechnica.com/information-technology/2016/04/bitcoin-firm-circle-electronic-money-licence-uk-barclays/ |website=arstechnica.com |access-date=5 April 2018 |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022046/https://arstechnica.com/information-technology/2016/04/bitcoin-firm-circle-electronic-money-licence-uk-barclays/ |url-status=live }} The adequacy of such licenses for the operation of a cryptocurrency exchange has not been judicially tested. The European Council and the European Parliament announced that they will issue regulations to impose stricter rules targeting exchange platforms.

In 2018, the U.S. Securities and Exchange Commission maintained that "if a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration".{{Cite web |date=7 March 2018 |title=Statement on Potentially Unlawful Online Platforms for Trading Digital Assets |url=https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading |website=U.S. Secured and exchange commission |access-date=5 April 2018 |archive-date=9 July 2022 |archive-url=https://web.archive.org/web/20220709060151/https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading |url-status=live }} The Commodity Futures Trading Commission now permits the trading of cryptocurrency derivatives publicly.{{Cite news |last=Cheng |first=Evelyn |date=2018-03-07 |title=The SEC just made it clearer that securities laws apply to most cryptocurrencies and exchanges trading them |work=CNBC |url=https://www.cnbc.com/2018/03/07/the-sec-made-it-clearer-that-securities-laws-apply-to-cryptocurrencies.html |access-date=2018-09-03 |archive-date=1 April 2022 |archive-url=https://web.archive.org/web/20220401022047/https://www.cnbc.com/2018/03/07/the-sec-made-it-clearer-that-securities-laws-apply-to-cryptocurrencies.html |url-status=live }}

Among the Asian countries, Japan is more forthcoming and regulations mandate the need for a special license from the Financial Services Authority to operate a cryptocurrency exchange.{{Cite news |last=Cheng |first=Evelyn |date=2018-03-23 |title=Japanese regulator warns big cryptocurrency exchange for operating without a license, bitcoin falls |work=CNBC |url=https://www.cnbc.com/2018/03/23/japanese-regulator-warns-major-cryptocurrency-exchange-for-operating-without-a-license-bitcoin-falls.html |access-date=2018-09-02 |archive-date=2 September 2018 |archive-url=https://web.archive.org/web/20180902151821/https://www.cnbc.com/2018/03/23/japanese-regulator-warns-major-cryptocurrency-exchange-for-operating-without-a-license-bitcoin-falls.html |url-status=live }} China and Korea remain hostile, with China banning bitcoin miners and freezing bank accounts.{{Cite news |last=Hsu |first=Sara |title=China's Shutdown of Bitcoin Miners Isn't Just About Electricity |language=en |work=Forbes |url=https://www.forbes.com/sites/sarahsu/2018/01/15/chinas-shutdown-of-bitcoin-miners-isnt-just-about-electricity/#41b7ee23369b |access-date=2018-09-03 |archive-date=3 September 2018 |archive-url=https://web.archive.org/web/20180903083414/https://www.forbes.com/sites/sarahsu/2018/01/15/chinas-shutdown-of-bitcoin-miners-isnt-just-about-electricity/#41b7ee23369b |url-status=live }}{{Cite web |title=China's Regulators Freeze Multiple Bitcoin OTC Accounts in Latest Crackdown on Cryptocurrency |url=https://www.yicaiglobal.com/news/china%E2%80%99s-regulators-freeze-multiple-bitcoin-otc-accounts-latest-crackdown-cryptocurrency |access-date=2018-09-03 |website=Yicai Global |language=en |archive-date=8 January 2018 |archive-url=https://web.archive.org/web/20180108140523/https://www.yicaiglobal.com/news/china%E2%80%99s-regulators-freeze-multiple-bitcoin-otc-accounts-latest-crackdown-cryptocurrency |url-status=dead }} While Australia is yet to announce its conclusive regulations on cryptocurrency, it does require its citizens to disclose their digital assets for capital gains tax.[https://www.ato.gov.au/misc/downloads/pdf/qc42159.pdf Tax treatment of cryptocurrencies in Australia - specifically bitcoin] {{Webarchive|url=https://web.archive.org/web/20180903082028/https://www.ato.gov.au/misc/downloads/pdf/qc42159.pdf |date=3 September 2018 }} ato.gov.au