Cryptocurrency exchanges are the linchpin of the digital industry, however, based on recent incidents and scandals, some of them definitely need to clean up their act.
Today, exchanges are a key part of the $300 billion USD coin-trading market’s growth, enabling investors to trade and enjoy new opportunities. However, a lack of regulation remains the biggest challenge to the industry’s credibility – hopefully, inroads are being made and the industry will evolve towards greater regulation and compliance.
Along those lines, obtaining a licence should be required as should greater transparency, accountability and security for any successful exchange.
The Office of the New York Attorney General (OAG) accused Bitfinex of using the reserves of affiliated cryptocurrency Tether to cover up a loss of $850 million USD to payment processor Crypto Capital, thereby violating New York law and defrauding residents. Crypto Capital later said it could not send funds because they had been seized by regulators in the UK, the U.S., Poland and Portugal. This led to Bitfinex arguing that the funds were recoverable.
The legal battle continues.
This is not the only incident or scandal in recent memory and all of these serve to tarnish the reputation of crypto exchanges, further damaging their credibility.
Fortunately, greater regulation appears to be on the horizon. Both the European Banking Authority and the European Securities and Markets Authority have called for crypto rules at EU level and G20 leaders declared support for Financial Action Task Force cryptocurrency guidelines that would make exchanges hand over user data to regulators. The initiative marks the first major attempt to set up a global approach to regulating the cryptocurrency sector.
To repair the cryptocurrency industry’s reputational damage and encourage wider participation in the market, rebuilding customer trust and improving transparency is a must and the best way of doing this is through regulation. Read more.
Photo by Jürg Kradolfer on Unsplash