Are Cryptocurrency Exchanges Regulated? – Cryptocurrency exchanges are basically websites where you can buy and sell cryptocurrencies. Cryptocurrencies have grown rapidly in the past decade. So, how should cryptocurrencies and regulated exchanges be regulated?
There is no general consensus on one authority that regulates cryptocurrency exchanges. There are differences in the interpretation of cryptos. The stock market is strictly regulated. The SEC regulates US stock exchanges. The purpose of the regulation is to protect investors from scams and fraud.
Are Cryptocurrency Exchanges Regulated?
Unlike cryptocurrencies, cryptocurrency exchanges have no central authority. In the United States, regulations for cryptos vary by state. Overall, the regulation of cryptocurrency exchanges is uncertain in the United States. There are no official rules to govern the exchange. Some federal officials claim authority over them due to the lack of consensus on the nature of cryptocurrencies.
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For example, the SEC considers crypto assets that meet the definition of ‘securities’ under its purview. Cryptocurrency exchanges where tokens are designated as securities should be registered with the SEC or exempt from registration. They will be included in the alternate trading system. However, there is not much progress.
As reported by Reuters, the SEC is also concerned that investors assume that cryptocurrency exchanges are regulated by the SEC. Since the SEC does not regulate cryptocurrency exchanges, the assumption can give investors a false sense of security.
The Commodity Futures Trading Commission (CFTC) describes Bitcoin as a commodity under the Commodity Exchange Act. While the CFTC has limited jurisdiction over the spot market, it regulates a wide range of derivatives markets, including virtual currency futures. The Chicago Board Options Exchange and the Chicago Mercantile Exchange offer futures linked to the price of Bitcoin. As a result, the CFTC has stricter jurisdiction over cryptocurrencies that are considered commodities.
The Financial Crimes Enforcement Network (FinCEN) does not consider cryptocurrency to be legal tender. However, FinCEN considers exchanges to be remitters subject to its jurisdiction. Usually, any company that helps transfer money from one entity to another requires a remittance license. They are required to register with FinCEN as a financial services business.
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US SEC aims to expand crypto compliance but hints at openness to industry https://t.co/IaoBLIZAZe — Cointelegraph (@Cointelegraph) January 7, 2020
The IRS considers cryptocurrencies an asset. Profits from investments in these virtual currencies, including Bitcoin, are taxed as capital gains tax. Therefore, businesses that transact in virtual currency need to record the details of cryptocurrency purchases and sales. They also have to pay taxes on profits from selling cryptocurrencies for cash or cryptocurrency. Taxes are also collected on the fair market value of any mined cryptocurrency, from the date of receipt, according to IRS guidelines.
Because there is no federal law on cryptocurrency, the regulatory landscape for cryptocurrencies and exchanges varies by state. For example, Wyoming is one of the friendliest states as far as cryptocurrency and blockchain regulations are concerned. The Legislature has passed a bill that exempts cryptocurrencies from property taxes. In contrast, Massachusetts has not taken any concrete steps to regulate virtual currencies or cryptocurrency exchanges. Other states, including New York, have passed restrictive laws.
The US Treasury has emphasized the need to regulate the cryptocurrency market to arrest criminal activity. Since regulations for cryptocurrencies and cryptocurrency exchanges vary widely, investors should be careful when using such platforms. Our content is designed to educate the 300,000+ crypto investors who use the platform. Although our articles are for informational purposes only, they are written in accordance with the latest guidelines from tax authorities worldwide and reviewed by certified tax experts before publication.
Cryptocurrency Regulation Tracker
Choosing the right cryptocurrency exchange in 2021 can be confusing. If you want to trade cryptocurrency, invest in altcoins, or exchange cryptocurrency for fiat currency, then you’ll need a reliable, trustworthy cryptocurrency exchange – but there are a few important factors you should consider before getting started.
If you are interested in crypto margin trading, for example, you may be interested in robust, advanced trading features. On the other hand, if you only focus on trading cryptocurrency for fiat currency (such as USD), then you may find that a simple, streamlined, user-friendly crypto exchange is the best choice.
This article will break down the top 5 cryptocurrency exchanges, giving advice on the best exchanges, free Best suited for various trading preferences, geographic locations, and fee structures.
Before registering with a cryptocurrency exchange and getting started, there are several important factors that must be considered. The best cryptocurrency exchange for your needs will vary depending on your geographic location, the amount of crypto you want to trade, and how you want to trade.
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All cryptocurrency exchanges are fundamentally similar in terms of funding and trading. Users of cryptocurrency exchanges create accounts, complete identity verification, fund their accounts with fiat currency or cryptocurrency, then trade and withdraw funds.
The following 5 cryptocurrency exchanges are the best options online today, and are divided by ease of use, fee structure, trading functionality, security, and trading partners.
Coinbase is one of the most popular cryptocurrency exchanges, and is an ideal entry point for new traders or new cryptocurrency investors in the crypto ecosystem. Coinbase gives crypto traders and investors two options – Coinbase and Coinbase Pro.
Coinbase is primarily focused on making cryptocurrency purchases simple and intuitive, and not burdening users with complicated trading interfaces. The standard Coinbase platform acts as a simple broker and wallet, allowing users to buy or sell cryptocurrency for fiat currency or exchange between different cryptocurrencies instantly.
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Coinbase Pro is a more sophisticated trading tool aimed at users who want access to a more robust trading experience and provides a more complex trading UI than expected on a cryptocurrency exchange.
Binance is one of the most widely used cryptocurrency exchanges online, and arguably one of the richest options available. Launched in 2017, Binance began as a crypto-only exchange focused on listing a wide range of cryptocurrencies, but added support for fiat currencies in 2019-2020.
The rich feature set offered by Binance makes it popular with traders looking for low-cost altcoins, margin trading, or more complex features such as liquidity exposure or crypto-backed loans. The powerful, customizable trading UI offered by Binance makes it ideal for professional traders, while robust API access allows algorithmic traders to trade through third-party systems.
Binance can be intimidating for new traders, but offers three separate trading UI options – Basic, Classic, and Advanced, ensuring that the entire experience is responsive.
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Crypto.com is primarily focused on accelerating cryptocurrency adoption, narrowing the gap between fiat currency and cryptocurrency. Rather than providing a “traditional” cryptocurrency exchange experience, Crypto.com is aimed at smartphone users and aims to make cryptocurrency trading as easy as traditional banking.
The biggest advantage offered by Crypto.com is the ease of the platform that integrates cryptocurrency into everyday life. Crypto.com provides users with cryptocurrency funded debit cards, which are available in multiple tiers.
Crypto.com makes point exchanges available to traders that offer impressive liquidity and a competitive fee structure. Using Crypto.com, it is possible to buy, invest, or trade cryptocurrency, then use crypto directly in everyday life using a Crypto.com debit card — a rare proposition in the current regulatory environment.
Bittrex is one of the longest running digital currency exchanges online, and was founded in Seattle in 2013 by three former Microsoft employees. Bittrex has a reputation as the safest cryptocurrency exchange online, and has never experienced or loss of customer funds since its launch.
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Bittrex, like Binance, was founded primarily as a crypto-only exchange, but offers USD fiat support for specific US states and some international countries for verified users. The main attraction of Bittrex is the level of diversification of cryptocurrencies listed by the platform, with a focus on promising new tokens and projects.
Uphold uses a different approach to cryptocurrency trading compared to “traditional” crypto exchanges like Binance or Coinbase. Instead of focusing only on cryptocurrency, Uphold offers multi-product functionality that allows users to invest in and trade crypto, precious metals, and fiat currencies.
The Uphold platform is at the heart of the Uphold smartphone app, and offers commission-free trading. Notably, Uphold offers 0% fees on credit and debit card deposits, which makes it a highly attractive option for investors who want to quickly buy crypto with a card without paying excessive fees.
Uphold’s trading UI is not as complex as platforms aimed at professional traders, but the simple, streamlined interface makes it possible to quickly exchange fiat for 30 different cryptocurrencies and 4 precious metals, making it the ideal solution for retail or casual investors.
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Choosing the right cryptocurrency exchange for your needs depends entirely on your personal needs. If you are a professional trader and need the functionality of a robust trading interface, Binance or Bittrex will provide the tools you need. New crypto investors or casual investors, however, may benefit from the simplified and improved trading interface offered by Coinbase or Uphold.
When trading cryptocurrency on cryptocurrency exchanges, it is important to remember that exchange wallets are “hot” wallets and therefore not a safe option for long-term crypto storage. If you trade cryptocurrency, it is