Cryptocurrency Exchanges and Regulations
Are Cryptocurrency Exchanges Regulated? Cryptocurrency exchanges are an online platform where users can buy, sell, and trade cryptocurrencies. In the past few years, cryptocurrency exchanges have become increasingly popular with both private investors and institutional investors. As a result, there have been many cryptocurrency exchange hacks in recent years which has led to some governments regulating them.
For example, in Japan, following the Mt. Gox hack in 2014, the Financial Services Agency ordered all exchanges to improve their anti-money laundering and combating the financing of terrorism (AML/CFT) compliance, and to increase their customer protection standards. However, the Mt. Gox hack was the largest cryptocurrency exchange hack in history.
As a result of this hack, cryptocurrency exchanges have since implemented more stringent AML/CFT compliance. As more people have started to adopt cryptocurrency, its value has increased exponentially, and has attracted more investors who have more money to lose. As a result, the exchange trade between cryptocurrencies and fiat currencies has grown.
These exchanges are now required to adhere to the same AML/CFT standards as traditional fiat currency exchanges.
The increase in interest and use of cryptocurrency has also contributed to the growth of the blockchain technology industry. References
Cryptocurrency exchanges are one of the few places where the digital currency markets meet with traditional finance. Their potential to influence global finance and fluctuating prices has resulted in a focus on regulation. Exchanges are required to comply with securities laws, anti-money laundering (AML) and know your customer (KYC) regulations, and also provide financial reports to the National Futures Association (NFA), which is a self-regulatory organization (SRO) for the U.S. national markets.
Bottom Line
Like any other type of organization in the financial sector, cryptocurrency exchanges are subject to regulation and rules.
The U.S. Commodity Futures Trading Commission (CFTC) has been investigating cryptocurrency exchanges for fraud and market manipulation. The U.S. Securities and Exchange Commission (SEC) has filed lawsuits against at least 8 cryptocurrency exchanges for fraud and is investigating other cryptocurrency exchanges for possible wrongdoing.
Most countries have some type of regulation in place for cryptocurrency exchanges. For example, in the European Union, cryptocurrency exchanges are regulated by the European Securities and Markets Authority (ESMA).
