Regulated bitcoin and crypto exchanges manage and control their businesses properly, with due diligence and have implemented effective triggers in place for the protection of user funds when they’re stored on the platform such as:
Higher security practices and standards
Experienced staff training
Continuous activity monitoring
Continuous vulnerability and threat auditing, analysis and testing
Financial threat triggers
As of today, the best-regulated bitcoin and cryptocurrency exchanges are as follows:
A very high-profile cryptocurrency exchange founded in 2012 by Brian Armstrong, located in San Francisco. It can operate in most US states and Europe. Coinbase holds the most money-transmitter licenses out of all existing crypto exchanges and takes regulation and compliance very seriously. It is also registered as a Money Services Business (MSB) with FinCEN and supervised by the Financial Conduct Authority under the Electronic Money Regulations.
Coinbase is regulated by:
U.S customer funds, held as cash, are maintained in dedicated pooled custodial accounts, separated from Coinbase’s funds. These accounts are in banks insured by the Federal Deposit Insurance Corporation (FDIC). The custodial accounts are insured for $250,000 per individual.
Kraken was founded in 2011, making it the oldest exchange on the list of regulated exchanges dealing with cryptocurrencies. When it comes to regulation and compliance Kraken was and still is amongst the first to comply with all regulatory requirements in all of the jurisdictions it operates in.
Kraken is regulated by:
FINTRAC in Canada
Registered as a Money Services Business (MSB) with FinCEN in the USA
The futures part of Kraken is regulated by the Financial Conduct Authority (FCA), which is the United Kingdom’s financial regulatory body. The licenses held by Kraken give it the opportunity to safely operate worldwide.
Founded in 2006, eToro, started as a margin trading platform made for currencies, commodities, stocks, ETFs, and Indices while becoming one of the biggest social trading platforms. In 2013 eToro enabled Bitcoin trading via CFDs and since then continued to extend its cryptocurrency offering.
eToro is regulated by:
Australian Securities and Investments Commission (ASIC)
Registered as a Money Services Business (MSB) with FinCEN in the USA
Cyprus Securities Exchange Commission (CySEC)
UK’s Financial Conduct Authority (FCA)
While you can only trade and invest in cryptos without being able to physically withdraw them to your wallet on eToro, you can easily do so on their new pure digital asset exchange – eToroX. Their daughter exchange is also regulated by the GSFC in Gibraltar.
Gemini is regulated by the New York State Department of Financial Services (NYSDFS) and registered as a trust company, making it exempt from having to register with the FinCEN. Founded by the Winklevoss twins the exchange implements the highest security standards and has a FIPS 140-2 Level 3 rating which points that Gemini has passed the strictest of security tests.
Gemini is regulated by:
NYSDFS – New York State Department of Financial Services
The Winklevoss’s platform has one of the friendliest environments for casual traders, simplifying the way cryptocurrencies are traded. From first glance, the platform shows its high standards in all fields and on top of that it adds additional investing instruments found rarely in the industry for now.
Located in Viena, Austria and serving over 1 million people since its inception in 2014, Bitpanda provides multiple altcoins besides Bitcoin and FIAT deposits. Even though Bitpanda is not regulated directly, it is compliant in all of the possible ways. Bitpanda Payments has the Payment Services Directive 2 (PSD2) license, which gives it the benefit of legally operating in the European Economic Area (EEA) and the European Union.
Bitpanda Payments is regulated by:
Financial Market Authority (FMA)
The platform is one of the few user-friendly platforms that are based in Europe and it is also one of the few exchanges that have no complaints from its userbase. It offers a variety of investment instruments like the options to buy and sell Gold, Silver Palladium and Platinum besides cryptocurrencies.
Cex first started as a cloud mining provider in 2013, later it shifted to a full-fledged exchange, attracting a sizeable userbase through the years. Registered with the FinCEN as a Money Services Business, it is also a PCI DSS compliant level 1 service provider. In 2019 CEX received a DLT license from Gibraltar.
Cex is regulated by:
The exchange continues to develop and add to its portfolio of trading instruments. Recently it has gone through a slight redesign, coming up with a modern and more attractive main page. While CEX offers 10+ cryptocurrencies and multiple fiat currencies for trading, the exchange also introduced leverage trading to its trading portfolio.
Key advantages of Regulated Cryptocurrency Exchanges
Any licensed crypto exchange must closely follow a set of practices in order to stay within a regulated framework and operate legally. Usually, the regulators grant a license to companies that meet a certain level, experience in the field and are in a stable financial situation.
Regulated cryptocurrency exchanges usually are required to:
Lead a transparent and honest business
Communicate to its customers in a clear way, which is not misleading.
Disclose the risks associated with the offered products and services
Еxplicitly show the sustainability of their business model to the regulators
Мaintain the adequacy of financial and non-financial resources
Be able to retain, audit and maintain standards when it comes to records
Regulated bitcoin exchanges are complying with the procedures, laws, and guidelines issued by the regulatory framework they’re operating in and are required to have triggers for various financial crime risks such as money laundering. They also need to be aware of the vulnerabilities of its products and services when it comes to financial crime risks.
They’re constantly ensuring that proper measures are in place to prevent or mitigate the risks such as developing and testing disaster recovery and crisis management plans in case of a breach which may affect the users or worst-case scenario plans such as Solvent Wind Down (SWD) if the company goes into liquidation.
Since cryptocurrencies are still mostly in the gray sector, there are only a handful of pioneers when it comes to obtaining such a license. For an exchange or broker to obtain such a license there are several benefits such as:
Easier real-life partnerships with payment providers and banks
Easier online advertising
Immense boost of trustworthiness
Key disadvantages of Regulated Cryptocurrency Exchanges
Limited product offering
Extensive KYC procedures
Harder to implement new features
Higher operating costs
Obtaining a license is costly
Who regulates the bitcoin exchanges?
Cryptocurrency exchanges are regulated by independent federal agencies, which protect investors while also maintaining the order and functioning of the securities markets and facilitating capital formation. Although Bitcoin is not classified as a security, it is still in a predominantly gray sector and there is no global agreement on this to date.
Some of the regulatory authorities are:
SEC – U.S. Securities and Exchange Commission in the USA.
CySEC – Cyprus Securities and Exchange Commission
FSA – Financial Services Authority of the UK
GFSC – Gibraltar Financial Services Commission
CSRC – China Securities Regulatory Commission
Each country has its own regulatory authorities that regulate the financial markets. Therefore, they regulate the stock exchanges, and if an exchange wants to be sound when it comes to legal operations in a certain jurisdiction – it must obtain the necessary license.
Different jurisdictions may have different regulatory laws and requirements, having a license in one of them doesn’t guaranteethat it will be viable in other jurisdictions or allow for global operations.
Even after reading our reviews, you should always do your personal research. Licenses are not the best indicator of high security and stability. How the platform is handled and how they care for their users are also very important indicators.