Cryptocurrency exchange


Cryptocurrency exchanges or digital currency exchanges (DCE) are businesses that allow customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money, or different digital currencies.[1][2] They can be market makers that typically take the bid/ask spreads as transaction commissions for their services or simply charge fees as a matching platform.[2]DCEs may be brick-and-mortar businesses, exchanging traditional payment methods and digital currencies, or strictly online businesses, exchanging electronically transferred money and digital currencies.[3] Most digital currency exchanges operate outside of Western countries,[4] avoiding regulatory oversight and complicating prosecutions, but DCEs often handle Western fiat currencies, sometimes maintaining bank accounts in several countries to facilitate deposits in various national currencies.[5][6] They may accept credit card payments, wire transfers, postal money orders, cryptocurrency or other forms of payment in exchange for digital currencies.[7] They can send cryptocurrency to your personal cryptocurrency wallet. Many can convert digital currency balances into anonymous prepaid cards which can be used to withdraw funds from ATMs worldwide.[5][6]Some digital currencies are backed by real-world commodities such as gold.[8]Creators of digital currencies are often independent of the DCEs that trade the currency.[6] 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.[3][9] Customers buy or sell digital currency from DCEs, who transfer the digital currency into or out of the customer's DCP account.[9] Some DCEs are subsidiaries of DCP, but many are legally independent businesses.[3] The denomination of funds kept in DCP accounts may be of a real or fictitious currency.[9] 


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.[10]In 2006, US-based digital currency exchange business GoldAge Inc., a New York state business, was shut down by the US Secret Service after operating since 2002.[11] 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.[9] Customers provided limited identity documentation, and could transfer funds to anyone worldwide, with fees sometimes exceeding $100,000.[9] 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.[12]In April 2007, the US 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.[13] A few weeks later, E-Gold faced four indictments. Here is the DoJ release[14] and here is the rebuttal by Douglas Jackson, CEO.[15]In July 2008, Webmoney changed its rules, affecting many exchanges. Since that time it became prohibited[by whom?] to exchange Webmoney to the most popular e-currencies like E-gold, Liberty Reserve and others.[16]Also in July 2008 E-gold's three directors accepted a bargain with the prosecutors and plead guilty to one count of "conspiracy to engage in money laundering" and one count of the "operation of an unlicensed money transmitting business".[17] 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.[18] 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."[19] Budovsky, a former U.S. citizen and naturalized Costa Rican, was convicted in connection with the 2006 Gold Age raid.[12][20] A U.S. indictment said the case "is believed to be the largest international money laundering prosecution in history."[20]More than $40 million in assets were placed under restraint pending forfeiture, and more than 30 Liberty Reserve exchanger domain names were seized.[19][21] The company was estimated to have laundered $6 billion in criminal proceeds.[19]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.The US Securities and Exchange Commission maintains 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"[22].In Japan to operate a cryptocurrency exchange a special license must be obtained from the Financial Services Authority of Japan specifically for the operation of a virtual currency exchange[23]. In the Republic of Belarus cryptocurrency exchanges may be licensed under the Presidential Decree No 8 of 22 December 2017 "On the Development of Digital Economy"[24]. In the Kyrgyz Republic cryptocurrencies are considered commodities[25] and may be freely traded at any regulated commodities exchange[26]. Several cryptocurrency exchanges operating in the European Union obtained licenses[27] under the EU Payment Services Directive and the EU Electronic Money Directive. 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[28]


List of some notable digital currency exchanges

Main article: List of bitcoin companiesTitleCountryFiat moneyBitcoinAltcoinsCommodityTrade FeeDecentralizedANX Hong UKNoYesNoNo0.5%NoBittrex USANoYesYesNo0.25%[29]NoBitfinex Hong KongYesYesYesNo0.0%-0.2%[30]NoBTCChina ChinaYesYesYesNo0%NoBuyUcoin IndiaYesYesYesNo0.42%-0.84%NoCEX.IO UKYesYesYesYes0.2% - 7%NoCoinbase USAYesYesYesNo1%NoCoincheck JapanYesYesYesNo-0.05% - 0.15%NoCoinfloor UKYesYesNoNo0.08 - 0.55%NoGDAX USAYesYesYesNo0.1% to 0.25%[31]NoGemini USAYesYesNoNo-0.15% (rebate) to 0.25%[32]NoHitBTC UKNoYesYesNo-0.01% to 0.10%NoKraken USAYesYesYesNo0.05 - 0.50%NoLocalBitcoins FinlandYesYesNoNo1%YesLuno South AfricaYesYesNoNo0% - 1%NoPoloniex USANoYesYesNo0.10%-0.25%No

Over the counter trading (OTC)

Over-the-counter or off-the-exchange trading of bitcoins is a more flexible and convenient way of trading bitcoins comparing to traditional exchanges.OTC trading has kept growing since 2014 in various financial markets as more institutions taking the trades off the exchange.[33] Today, many corporations or institutions employ individual traders or bitcoin-OTC trading desks to perform this task at moderate expenses.[34] Some representatives bitcoin-OTC trading desks could be, itBit, Coinfloor, Octagon Strategy Limited, LocalBitcoins, Bitstamp, BitX etc.[35]


The quotes given by OTC trading desks are generally in line with the main bitcoin trading desks, such as coindesk, localbitcoins, bitstamp, btcxindia, zebpay.[36]

Preserve Market Stability

Experienced OTC traders would fill large orders with multiple smaller orders outstanding in the public order book thus to avoid predatory pricing behaviours[37] in the bitcoin markets.[33]

List of some notable bitcoin OTC desks

TitleCountryFiat moneyBitcoinAltcoinsTrade feeSettlementMin. Limit (no. of btc)Bitfinex Hong KongYesYesYes0.1 - 0.2%NANAitBit[38] SingaporeYesYesNo0.1% per transactionT+0100Coinfloor[39] UKYesYesNo0.1 - 0.38%T+0NAOctagon Strategy[40] Hong KongYesYesYes[41]0.1-0.5%T+0NALocalBitcoinsWorldwideYesYesNo0.0001 - 0.0010 BTC per outgoing transfer[42]NANABitX[43] SingaporeYesYesNo0.1%NA250

See also


  1. Jump up^ "Best Cryptocurrency Exchanges: The Ultimate Guide". 24 April 2017.
  2. ^ Jump up to:a b "Digital Currency Exchanger (DCE) Definition". Investopedia Dictionary. Investopedia US, a division of ValueClick, Inc. Retrieved 11 January 2014.
  3. ^ Jump up to:a b c Working Group on Typologies (18 October 2010). "Draft Report on Money Laundering and Terrorist Financing through New Payment Methods" (PDF). Paris: Financial Action Task Force. Archived from the original (PDF) on 11 February 2014.
  4. Jump up^ "How To Buy Bitcoins Online". WeUseCoins Guide. We Use Coins. Retrieved 30 April2016.
  5. ^ Jump up to:a b "Substantiation – Money laundering in digital currencies (Unclassified)". Money Laundering in Digital Currencies. National Drug Intelligence Center, US Department of Justice. June 2008. Retrieved 11 January 2014.
  6. ^ Jump up to:a b c Sood, Aditya K; Enbody, Richard J; Bansal, Rohit (2013). "Cybercrime: Dissecting the State of Underground Enterprise". IEEE Internet Computing (1). IEEE Computer Society. pp. 60–68. doi:10.1109/MIC.2012.61.
  7. Jump up^ "Cryptocurrency overzicht: meest populaire cryptovaluta". Cryptostart (in Dutch). Retrieved 2017-12-13.
  8. Jump up^ Byrnes, William H.; Munro, Robert J. (2 October 2013). Money Laundering, Asset Forfeiture and Recovery and Compliance – A Global Guide. LexisNexis. p. 2802. ISBN 978-0-327-17084-6. (Page number assigned by Google Books.)
  9. ^ Jump up to:a b c d e Hesterman, Jennifer L (17 April 2013). The Terrorist-Criminal Nexus: An Alliance of International Drug Cartels, Organized Crime, and Terror Groups. CRC Press. p. 218. ISBN 978-1-4665-5761-1.
  10. Jump up^ "ASIC acts to shut down electronic currency trading websites" (Press release). Australian Securities & Investments Commission. 9 November 2004. Archived from the original on 23 March 2011. Retrieved 9 January 2014.
  11. Jump up^ McCullagh, Declan (30 March 2001). "Secret service raids Gold-Age". Wired. Condé Nast. Retrieved 9 January 2014.
  12. ^ Jump up to:a b Boddiger, David; Arias, L (24 May 2013). "Millions of dollars in limbo after shuttering of digital currency site Liberty Reserve". The Tico Times. San José, Costa Rica. Retrieved 9 January 2014.
  13. Jump up^ " is offline". Retrieved 24 February 2015.
  14. Jump up^ "#07-301: 04-27-07 Digital Currency Business E-Gold Indicted for Money Laundering and Illegal Money Transmitting". 2007-04-24. Retrieved 2013-12-11.
  15. Jump up^ "e-gold® Founder Denies ..." Archived from the original on 4 June 2009. Retrieved 24 February 2015.
  16. Jump up^[dead link]
  17. Jump up^ Grant Gross (2007-07-22). "IDG News Service Internet currency firm pleads guilty to money laundering". Archived from the original on 2009-04-14.
  18. Jump up^ Richet, Jean-Loup (June 2013). "Laundering Money Online: a review of cybercriminals methods". arXiv:1310.2368 .
  19. ^ Jump up to:a b c "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"". United States Department of Homeland Security. 18 November 2013. Retrieved 11 January 2014.
  20. ^ Jump up to:a b Matonis, Jon (28 May 2013). "U.S. Shuts Currency Exchange Allegedly Tied To $6B In Money Laundering". Forbes. LLC. Retrieved 11 January 2014.
  21. Jump up^ "Digital currency biz Liberty Reserve shut down, founder arrested | VentureBeat | Security | by Sean Ludwig". VentureBeat. Retrieved 2013-12-11.
  22. Jump up^ "Statement on Potentially Unlawful Online Platforms for Trading Digital Assets". U.S. Secured and exchange comission. 7 March 2018.
  23. Jump up^ "Japanese Financial Authority Inspecting 32 Cryptocurrency Exchanges". 3 February 2018.
  24. Jump up^ "О развитии цифровой экономики". 21 December 2017.
  25. Jump up^ "Кыргызское законодательство дружественно к операциям с блокчейн-активами". Вечерний Бишкек. 4 April 2018.
  26. Jump up^ "Kyrgyzstan and Crypto Business". Internetional Financial Centre Development Agency. 4 April 2018.
  27. Jump up^ "Bitcoin firm bags first electronic money licence in the UK". 4 July 2016.
  28. Jump up^ "EU to Crack Down on Bitcoin in Move Prevent Funding of Terrorism". Sputnik. 16 December 2017.
  29. Jump up^ "Services Fees and Limitations". Retrieved 30 April 2017.
  30. Jump up^ "Our Fees". Retrieved 30 April 2017.
  31. Jump up^ "Fee Structure". Retrieved 17 November 2016.
  32. Jump up^ "New Fee And Rebate Structure". Retrieved 1 April 2016.
  33. ^ Jump up to:a b "How Bitcoin Brokers Trade Millions Without an Exchange". CoinDesk. 2014-09-05. Retrieved 2017-01-03.
  34. Jump up^ Willms, Jessie (2015-11-02). "New Data from OTC Trading Desks Reveals Millions of Dollars in Bitcoin Traded Off Public Markets". Bitcoin Magazine. Retrieved 2017-01-04.
  35. Jump up^ "Bitcoin koers, informatie, wallets & bitcoins kopen". Cryptostart (in Dutch). Retrieved 2017-12-13.
  36. Jump up^ Limited, Unocoin Technologies Private. "Unocoin | Launching OTC Platform for high volume traders". Retrieved 2017-01-04.
  37. Jump up^ Commission, Australian Competition and Consumer (2013-01-09). "Predatory pricing". Australian Competition and Consumer Commission. Retrieved 2017-01-04.
  38. Jump up^ "Bitcoin OTC Trading | itBit". Retrieved 2017-01-04.
  39. Jump up^ "OVER-THE-COUNTER MARKET". Retrieved 2017-01-04.
  40. Jump up^ "octfinancial". octfinancial. Retrieved 2017-01-04.
  41. Jump up^ "Octagon Strategy Ltd commences Ethereum trading (ETH)". Retrieved 2017-03-31.
  42. Jump up^ " Fastest and easiest way to buy and sell bitcoins". Retrieved 2017-01-04.
  43. Jump up^ "Introducing: BitX Bitcoin OTC Desk". The BitX blog. 2016-06-07. Retrieved 2017-01-04.

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