Difference between revisions of "Exchanges"

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The [[U.S. Securities and Exchange Commission]]'s (SEC's) Divisions of Trading and Markets and Enforcement formally warned the public not to be confused about the term "exchange" being used by trading platforms which are not regulated or overseen by the SEC, stating, "Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange."<ref>{{cite web|url=https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading|name=Statement on Potentially Unlawful Online Platforms for Trading Digital Assets|org=U.S. Securities and Exchange Commission|date=August 1, 2018}}</ref>         
 
The [[U.S. Securities and Exchange Commission]]'s (SEC's) Divisions of Trading and Markets and Enforcement formally warned the public not to be confused about the term "exchange" being used by trading platforms which are not regulated or overseen by the SEC, stating, "Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange."<ref>{{cite web|url=https://www.sec.gov/news/public-statement/enforcement-tm-statement-potentially-unlawful-online-platforms-trading|name=Statement on Potentially Unlawful Online Platforms for Trading Digital Assets|org=U.S. Securities and Exchange Commission|date=August 1, 2018}}</ref>         
 
        
 
        
On August 1, 2018, CoinMarketCap reported on and ranked 207 different cryptocurrency trading platforms from around the world.<ref>{{cite web|url=https://coinmarketcap.com/exchanges/volume/24-hour/|name=24 Hour Volume Rankings (Exchange)|org=CoinMarketCap|date=August 1, 2018}}</ref> Around the same time, Markets Media Group's Traders magazine estimated the number of number of exchanges to be more than twice that at over 500 of them.<ref>{{cite web|url=http://www.tradersmagazine.com/news/buyside/bringing-cryptocurrency-into-the-institutional-order-flow-118015-1.html?utm_source=Forefront+Trading+Digest&utm_campaign=f15dc671d7-EMAIL_CAMPAIGN_2017_10_20_COPY_01&utm_medium=email&utm_term=0_b769b7eba3-f15dc671d7-203696945|name=Bringing Cryptocurrency into the Institutional Order Flow|org=Traders|date=August 2, 2018}}</ref> In December 2019, despite a persistent and widespread fall-off in trading volumes, CoinMarketCap reported on trading volumes on 306 cryptocurrency trading platforms.<ref>{{cite web|url=https://coinmarketcap.com/rankings/exchanges/reported/4/|name=https://coinmarketcap.com/rankings/exchanges/reported/4/
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On August 1, 2018, CoinMarketCap reported on and ranked 207 different cryptocurrency trading platforms from around the world.<ref>{{cite web|url=https://coinmarketcap.com/exchanges/volume/24-hour/|name=24 Hour Volume Rankings (Exchange)|org=CoinMarketCap|date=August 1, 2018}}</ref> Around the same time, Markets Media Group's Traders magazine estimated the number of number of exchanges to be more than twice that at over 500 of them.<ref>{{cite web|url=http://www.tradersmagazine.com/news/buyside/bringing-cryptocurrency-into-the-institutional-order-flow-118015-1.html?utm_source=Forefront+Trading+Digest&utm_campaign=f15dc671d7-EMAIL_CAMPAIGN_2017_10_20_COPY_01&utm_medium=email&utm_term=0_b769b7eba3-f15dc671d7-203696945|name=Bringing Cryptocurrency into the Institutional Order Flow|org=Traders|date=August 2, 2018}}</ref> In December 2019, despite a persistent and widespread fall-off in trading volumes, CoinMarketCap reported on trading volumes on 306 cryptocurrency trading platforms.<ref>{{cite web|url=https://coinmarketcap.com/rankings/exchanges/reported/4/|name=Top Cryptocurrency Exchanges by Trade Volume|org=CoinMarketCap|date=December 6, 2019}}</ref>
  
 
In March 2018, a cryptocurrency trader named Sylvain Ribes published an indictment of cyrptocurrency exchanges' volume reporting practices.<ref>{{cite web|url=https://medium.com/@sylvainartplayribes/chasing-fake-volume-a-crypto-plague-ea1a3c1e0b5e|name=Chasing fake volume: a crypto-plague|org=Medium|date=September 20, 2018}}</ref> CoinMarketCap, which is a widely followed cryptohttps://www.sec.gov/news/press-release/2019-59 data reporter, started reporting adjusted data for cryptocurrency exchanges during Summer 2018.<ref>{{cite web|url=https://bitcoinexchangeguide.com/blockchain-transparency-institute-top-100-exchanges-are-faking-6-billion-in-daily-trade-volumes/|name=Blockchain Transparency Institute: Top 100 Exchanges are Faking $6 Billion in Daily Trade Volumes|org=Bitcoin Exchange Guide|date=September 20, 2018}}</ref> The newly formed [[Blockchain Transparency Institute]] began taking an independent view of exchange trading volumes and reporting on them in August 2018.<ref>{{cite web|url=https://bitcoinist.com/6-billion-volume-faked-coinmarketcap/|name=OVER $6 BILLION IN DAILY TRADING VOLUME FAKED ACROSS TOP 100 EXCHANGES|org=BitCoinist|date=September 19, 2018}}</ref>     
 
In March 2018, a cryptocurrency trader named Sylvain Ribes published an indictment of cyrptocurrency exchanges' volume reporting practices.<ref>{{cite web|url=https://medium.com/@sylvainartplayribes/chasing-fake-volume-a-crypto-plague-ea1a3c1e0b5e|name=Chasing fake volume: a crypto-plague|org=Medium|date=September 20, 2018}}</ref> CoinMarketCap, which is a widely followed cryptohttps://www.sec.gov/news/press-release/2019-59 data reporter, started reporting adjusted data for cryptocurrency exchanges during Summer 2018.<ref>{{cite web|url=https://bitcoinexchangeguide.com/blockchain-transparency-institute-top-100-exchanges-are-faking-6-billion-in-daily-trade-volumes/|name=Blockchain Transparency Institute: Top 100 Exchanges are Faking $6 Billion in Daily Trade Volumes|org=Bitcoin Exchange Guide|date=September 20, 2018}}</ref> The newly formed [[Blockchain Transparency Institute]] began taking an independent view of exchange trading volumes and reporting on them in August 2018.<ref>{{cite web|url=https://bitcoinist.com/6-billion-volume-faked-coinmarketcap/|name=OVER $6 BILLION IN DAILY TRADING VOLUME FAKED ACROSS TOP 100 EXCHANGES|org=BitCoinist|date=September 19, 2018}}</ref>     
  
Cryptocurrency trading platforms have often been hacked, frequently with losses valued in multiple millions of U.S. dollars. The two largest publicly known hacks - $450 million at [[Mt. Gox]] in 2014 and $535 million at [[Coincheck]] in 2018 - occurred at Japanese platforms.<ref>{{cite web|url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000|name=Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy|org=Wall Street Journal|date=August 2, 2018}}</ref> There have been few if any hacks at major U.S. based cryptocurrency trading platforms.       
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Cryptocurrency trading platforms have often been hacked, frequently with losses valued in multiple millions of U.S. dollars. The two largest publicly known hacks - $450 million at [[Mt. Gox]] in 2014 and $535 million at [[Coincheck]] in 2018 - occurred at Japanese platforms.<ref>{{cite web|url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000|name=Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy|org=Wall Street Journal|date=August 2, 2018}}</ref> There have been few if any hacks reported by the major U.S.-based cryptocurrency trading platforms.       
  
 
=== Decentralized exchanges ===
 
=== Decentralized exchanges ===
  
Most cryptocurrency exchanges in the U.S. are electronic platforms. Recently, a new type of trading platform called a decentralized exchange - sometimes called a "DEX" platform - has emerged.<ref>{{cite web|url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000|name=Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy|org=Wall Street Journal|date=August 2, 2018}}</ref>  Unlike "centralized" exchanges, which hold their users' assets, decentralized exchanges do not require users to make accounts or deposit their assets. Theoretically, this makes them resistant to hacking attacks, although currently there are only a small number of users on them, and consequently they do not currently have strong liquidity.<ref>{{cite web|url=https://news.bitcoin.com/decentralized-exchange-compendium-index-lists-over-200-dex-platforms/|name=Decentralized Exchange Compendium ‘Index’ Lists Over 200 Dex Platforms|org=Bitcoin.com|date=September 19, 2018}}</ref>
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Most cryptocurrency exchanges in the U.S. are electronic platforms. Recently, a new type of trading platform called a decentralized exchange - sometimes called a "DEX" platform - has emerged.<ref>{{cite web|url=https://www.wsj.com/articles/why-cryptocurrency-exchange-hacks-keep-happening-1531656000|name=Cryptocurrency Exchanges Are Getting Hacked Because It’s Easy|org=Wall Street Journal|date=August 2, 2018}}</ref>  Unlike "centralized" exchanges, which hold their users' assets, decentralized exchanges do not require users to make accounts or deposit their assets. Theoretically, this feature has made them resistant to hacking attacks, although currently there are only a small number of users on them and consequently they do not currently have strong liquidity.<ref>{{cite web|url=https://news.bitcoin.com/decentralized-exchange-compendium-index-lists-over-200-dex-platforms/|name=Decentralized Exchange Compendium ‘Index’ Lists Over 200 Dex Platforms|org=Bitcoin.com|date=September 19, 2018}}</ref>
  
 
In early December 2019, both CryptoBridge and Waves.DEX went out of business. CoinTelegraph, an online cryptocurrency news service, reported that trading on DEXs accounted for no more than one percent of total cryptocurrency trading volume.<ref>{{cite web|url=https://cointelegraph.com/news/cryptobridge-closes-down-and-waves-relaunches-dexs-face-tough-times|name=CryptoBridge Closes Down and Waves Relaunches, Dexs Face Tough Times|org=CoinTelegraph|date=December 6, 2019}}</ref>
 
In early December 2019, both CryptoBridge and Waves.DEX went out of business. CoinTelegraph, an online cryptocurrency news service, reported that trading on DEXs accounted for no more than one percent of total cryptocurrency trading volume.<ref>{{cite web|url=https://cointelegraph.com/news/cryptobridge-closes-down-and-waves-relaunches-dexs-face-tough-times|name=CryptoBridge Closes Down and Waves Relaunches, Dexs Face Tough Times|org=CoinTelegraph|date=December 6, 2019}}</ref>

Latest revision as of 18:57, 6 December 2019


(Cryptocurrency) exchanges are organized markets where people and entities exchange an amount of cryptocurrency for fiat money or another cryptocurrency. Having no legal or regulatory basis with regard to cryptocurrencies, the term "exchange" is used informally for a broad swath of businesses. For the most part, CryptoMarketsWiki employs the term "cryptocurrency trading platform" to avoid confusion with regulated trading venues.

Overview

The U.S. Securities and Exchange Commission's (SEC's) Divisions of Trading and Markets and Enforcement formally warned the public not to be confused about the term "exchange" being used by trading platforms which are not regulated or overseen by the SEC, stating, "Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange."[1]

On August 1, 2018, CoinMarketCap reported on and ranked 207 different cryptocurrency trading platforms from around the world.[2] Around the same time, Markets Media Group's Traders magazine estimated the number of number of exchanges to be more than twice that at over 500 of them.[3] In December 2019, despite a persistent and widespread fall-off in trading volumes, CoinMarketCap reported on trading volumes on 306 cryptocurrency trading platforms.[4]

In March 2018, a cryptocurrency trader named Sylvain Ribes published an indictment of cyrptocurrency exchanges' volume reporting practices.[5] CoinMarketCap, which is a widely followed cryptohttps://www.sec.gov/news/press-release/2019-59 data reporter, started reporting adjusted data for cryptocurrency exchanges during Summer 2018.[6] The newly formed Blockchain Transparency Institute began taking an independent view of exchange trading volumes and reporting on them in August 2018.[7]

Cryptocurrency trading platforms have often been hacked, frequently with losses valued in multiple millions of U.S. dollars. The two largest publicly known hacks - $450 million at Mt. Gox in 2014 and $535 million at Coincheck in 2018 - occurred at Japanese platforms.[8] There have been few if any hacks reported by the major U.S.-based cryptocurrency trading platforms.

Decentralized exchanges

Most cryptocurrency exchanges in the U.S. are electronic platforms. Recently, a new type of trading platform called a decentralized exchange - sometimes called a "DEX" platform - has emerged.[9] Unlike "centralized" exchanges, which hold their users' assets, decentralized exchanges do not require users to make accounts or deposit their assets. Theoretically, this feature has made them resistant to hacking attacks, although currently there are only a small number of users on them and consequently they do not currently have strong liquidity.[10]

In early December 2019, both CryptoBridge and Waves.DEX went out of business. CoinTelegraph, an online cryptocurrency news service, reported that trading on DEXs accounted for no more than one percent of total cryptocurrency trading volume.[11]

Regulation

As of the end of September 2018, there were no regulations at the state or federal level targeted directly at cryptocurrency exchanges per se, although some of their business activities require registration. Most U.S. states would require cryptocurrency exchanges that do business with residents to register with them locally as "money transmitters," and exchanges that operate across state lines must register with the U.S. Financial Crimes Enforcement Network division of the U.S. Treasury Department.[12]

At least until In 2018, the New York State Attorney General released a voluntary survey for cryptocurrency exchanges, including Coinbase, Gemini, and Kraken. Four exchanges - Binance, Gate.io, Huobi, and Kraken, declined to participate in the survey, claiming exemption from New York regulation because, they said, they did not offer their services to New York residents. The New York AG later released a report in September, highlighting the possibility that some of these exchanges might be operating illegally in the state. The report said that "many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges. The report also cited "serious conflicts of interest" evident in the business models and operations of some of these exchanges, as well as a general lack of transparency and auditability in the management of their platforms.[13][14][15]

References