We shall separate commercial exchanges from investment exchanges

[countryfree]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because most often they don't store any funds. You make a deal with them, and when it's over, the customer relation is over, everything's terminated.

Besides that, there are exchanges which offer margin trading, which propose lending and borrowing cryptos, and various other high risk activities. Those exchanges need strong regulations, to protect investors.

We have about the same differences between commercial banking and investment banking, and there are many economists arguing about the need to separate (or unite) these 2 activities. We shall have the same discussion with cryptos exchanges.
Many legislators around the world are talking about regulating exchanges, this is what they should talk about first.

[EarnOnVictor]

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because they don't store any funds. You make a deal with them, and when it's over, the customer relation is over, everything's terminated.

Besides that, there are exchanges which offer margin trading, which propose lending and borrowing cryptos, and various other high risk activities. Those exchanges need strong regulations, to protect investors.

So because one exchanges your money and the other allows you to trade make them different in the view of regulation? Well, I don't agree with you, neither do I think any serious government will agree with you. Maybe the points below would change your view on this:

1. Have you forgotten that it's human beings you are dealing with? Crypto aside, it's a matter of time before they would hide under that to launder money.
2. When they are not regulated, how do they sincerely pay taxes despite making money from people?
3. What if they just disappear with the customer's money?
4. Even if they didn't disappear, don't you think they can still be cheating people when they are not answerable to anyone?

Regulation is not always bad, it helps the economy and protects the assets and rights of people. And every company dealing with money are entitled to be regulated, not otherwise.
 

[pooya87]

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because they don't store any funds.

First we have to ask "why do governments regulate exchanges in first place?".
The answer is for a couple of reasons but the main one is to monitor people's financial transactions more. In simple terms: for more surveillance.
Now back to the quoted part, the government that wants to monitor how much money you have in a cryptocurrency and how much profit you make (to tax you) where your coins come from and where they go, etc. needs to enforce regulations (KYC and other restrictive measures) to gather information on you and monitor you better.

[Casdinyard]

I get what you're trying to put up here and for a while that has been the case with basically everything that could be traded in the market. A separate platform for exchange, and a separate one for investments. But there is a definitive reason as to why these two were merged into one eventually, and one of which is convenience, which is inarguably one of the best features one can offer as a platform.

"You entrust your money with us when you deposit the money you want to trade for other commodities, so why not cut the middle man, let you keep the fees you're going to pay for investing your money on a different platform, and just entrust it with us? That way you can conveniently manage all your tradings and holdings at the same time!" Is basically what happened in the past that led to this moment. Don't get us wrong, it is a system that is far from perfect, considering the numerous backlashes it has received over the years following the scandals that came up left and right, but it is a system that is welcomed by many and is a necessary one at that too. So as much as you hate the current paradigm, there's going to have to be some major shift in the convenience department of things before you could convince people and business entities in this industry to separate these two.

[serjent05]

The government is pushing the regulation of the exchanges for one purpose only.  They need to know the data on how much each user of an exchange is earning in order to tax them.  The government may make an excuse to execute the law by using the term anti-money laundering but it is just another world for tax evasion since laundered money are the money that are not taxed.

About exchanges, many exchanges are now offering both service of commercial and investment, we can see the service feature of exchanges like Binance, Houbi, Kucoin and many more.

[BIT-BENDER]

By you stating and interpreting commercial exchange and investment exchange the way you just did even if I don't think you are correct about the definition of both and I am open to further interaction with you here and maybe I would be able to understand you properly.

Okay let's put your explanation in context, you feel normal exchange only deals exchange of Fiat to crypto-currency and also the other way round. Well you would have made great sense if you have giving us some real example of this type of exchanges.

And also those exchange that has to do with trading and so on are to you called investment exchanges.

You said that the former doesn't need regulations and the later does need regulations, I would be very interested in knowing why you think so.
Exchanging funds like from fiat to crypto and vice versa is also as risky as trading. One of the purpose of regulation is to make a safe space for everyone and if you think regulations should be you self explained investment exchange then it should also be in the normal exchange.

[countryfree]

It seems people here aren't familiar with banking regulations, so I advise them to read the following:

https://en.wikipedia.org/wiki/1933_Banking_Act

Just as I approve those regulations on banks, I wish to get the same on exchanges. It would be good for us, as it would leave simple exchanges unregulated.

[Mauser]

We have about the same differences between commercial banking and investment banking, and there are many economists arguing about the need to separate (or unite) these 2 activities. We shall have the same discussion with cryptos exchanges.
Many legislators around the world are talking about regulating exchanges, this is what they should talk about first.

It is true that there are two types of banking systems, one for investment banking and one for ordinary consumer banking. The products they offer are completely different from each other, and the regulatory requirements are also very different. I can understand the arguments that these two system should be kept apart from each other to reduce the risk for the customers. Investment banking is much more risky than the consumer banking that just offers loans and savings account. The thing is that traditional consumer banking seem to slowly disappear with technological advancements. Do we really need an institution in 2023 with many offices around the world and thousands of employees that only collects money and lends it out? The crypto community shows us that the is huge potential for p2p networks without a big institution in the middle. The problem I have with crypto exchanges just for buying and selling, and investment exchanges with more advanced products is that we usually want as many traders as possible on an exchange to get the best possible price. The higher the number of people buying and selling on an exchange the better it is to find a counterpart for our transaction. If we divide exchanges for their different purposes it could be hard to find some buyer or seller for our alt coins.

[Zanab247]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

Since the deal is coming from the bank don't involve yourself in such exchange Op, because bank will never say anything good concerning cryptos or give you anything that will benefit you in crypto exchange than to do things that will make you to feel what they are telling you is right in their sector. If Bank borrow you any digital assets, they will get something huge in return at the end of the exchange that will make you regret with the exchange deal.

[Zaguru12]

Regulation is not always bad, it helps the economy and protects the assets and rights of people. And every company dealing with money are entitled to be regulated, not otherwise.
 

Regulating Exchanges only poses one advantage to the government which is the tax and that is not entirely bad. But the government regulating an exchange will somehow defeat the purpose of total decentralization of cryptocurrency. The government will definitely argue that they are after the citizen’s protection, I still think they just want to monitor people holdings because even banks that regulated the government still aren’t able to control the crimes or scams there. Moreover some countries government have made it clear that cryptocurrency is volatile and somewhat a Ponzi scheme, so I ask will this regulation make it less volatile?.

Just like others Exchanges mostly centralized ones that wants offer direct bank transfers should be regulated since they are involved in taking benefits from people like fees they charge but I wouldn’t advice any to keep there funds on them because it is regulated and the government feels they are secured after registering with them. FTX seems registered and yet they still got in a saga and people the government claim they protect are yet to recover there funds

[Nwada001]

This is just the same as the difference between the features of centralized exchange and those of decentralized exchange. And so far as I know, I don't see anything different between them other than the name you want to give them; they all possess the same purpose. So you can just say centralized exchanges should be regulated, but decentralized exchanges should not, since they are not involved in any form of customer money control, nor are they there to lend out money or perform any similar banking service other than business as usual.
 
In as much as we all don't like the centralized exchanges, saying they should completely be regulated is absolutely out of the question for me, because it will make no difference. Aside from the taxes that the regulatory body will want to charge from customers, they will want to have full control over the exchanges, telling them what to do and what not to do at any given time, which will really inconvenience the way crypto currency is supposed to be used. If you want regulation and your finances to be controlled by government bodies, just stay with the banking system.

[Z-tight]

Centralized exchanges being regulated is not a bad thing, so many of them do shady things for profit and they control their customers' keys and personal data, if they are not regulated they can use this money and information in the wrong way.

1. Have you forgotten that it's human beings you are dealing with? Crypto aside, it's a matter of time before they would hide under that to launder money.

There should be services people can use if they don't want to hand over their privacy to data farms, the government don't have to attack all the available services that provide privacy because they want to stop crypto money laundering, they know how easy it is for people to launder money with cash, so they know what the real problem is.

3. What if they just disappear with the customer's money?

If it is a decentralized exchange like bisq, you send your money into a multi-sig wallet controlled by you and the other trader.

[Victorik]

While this sounds like a pretty good idea, I don't think it will really be necessary. I don't think conventional banks and crypto exchange should be copying each other.

[Blitzboy]

Drawing crypto and banking parallels is quite insightful! 'Normal exchanges' mirror commercial banks, and high-risk ones reflect investment banks. Should we not apply similar rules to these crypto platforms? While 'regular exchanges' could use lesser regulation, high-risk ones require tighter frameworks! Universally accepted, right? But, here's the problem: Can traditional rules accommodate the crypto's fluidity? Given cryptos superior potential, duplicating regulations might restrict it! Thus, cryptos call for a sophisticated approach. The core challenge? Balancing innovation and investor protection. That's the pivotal issue, folks!

[bittraffic]

They are yet not done talking whether which crypto are Security and not. It wouldn't be over until they distinguish which is which. The exchanges are fighting back and I think more of the people in the community like Tim Draper are going to come out to support Gensler be remove from office. So there could be a fair fight if this will happen.

Right now we only distinguish CEX and DEX but to SEC they are all the same when it comes to protecting investors as Gary always says.

[countryfree]

This is just the same as the difference between the features of centralized exchange and those of decentralized exchange.

You totally misunderstood my subject.
I described 2 kinds of exchanges, and both can be centralized or decentralized.

[countryfree]

The difference shall not be limited to regulators, they also matter to everyone.

Commercial exchanges are much safer then investment exchanges. If you don't want to take any risk, don't use the investment exchanges.

[tbct_mt2]

More regulation with direct trading from and to fiat currencies.

I don't see more reasons to have stricter regulations because it is an exchange where you can trade with Margin or Futures. Margin and Futures are very risky but other markets like stocks, forex have high leverages too.

Exchanges with products and parnerships for commercial trading will charge additional fees on users and business companies but it is acceptable because they have to build up more complicated platforms and spend more resources for security, maintenance, marketting.

You can use your exchange account to store your coins as investment but it is risky and I disagree to classify exchanges as investment exchanges.

[CryptoHeadlineNews]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

So O.P, how about I say your thread is not complete, because after mentioning that we have two kinds of exchanges, I expected you to give an example which you failed to provide not even one, because by providing that I think it would have help people to understand more what you actually meant, of which I don't mind giving some examples which I stand to be corrected if I'm wrong, as it goes as follows;

Commercial exchange  (i.e they help people buy and sell coins)
1. Binance
2. Coinbase
3. Kucoin
4. Remitano
5. Bitstamp

Investment exchange (i.e They help people invest in several coins)
1. PancakeSwap
2. UniSwap
3. SushiSwap, e.t.c

[countryfree]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

So O.P, how about I say your thread is not complete, because after mentioning that we have two kinds of exchanges, I expected you to give an example which you failed to provide not even one, because by providing that I think it would have help people to understand more what you actually meant, of which I don't mind giving some examples which I stand to be corrected if I'm wrong, as it goes as follows;

Commercial exchange  (i.e they help people buy and sell coins)
1. Binance
2. Coinbase
3. Kucoin
4. Remitano
5. Bitstamp

Investment exchange (i.e They help people invest in several coins)
1. PancakeSwap
2. UniSwap
3. SushiSwap, e.t.c

Sorry, but you got it wrong.

Commercial exchanges are:

bitcoin.de
paxful.com

Investment exchanges are:

binance.com
coinbase.com

[Ucy]

If regulation is your main reason for wanting this seperation then I will suggest you align it with what many in Crypto space already believe is reasonable which is to create a distinction between non-custodial/decentralized and custodial/centralized exchanges, and have the centralized/custodial exchanges regulated by governments. The decentralized exchange should be free from such regulations depending on how decentralized and Bitcoin-friendly they are.

[BlackHatCoiner]

I don't like the term "investment exchange". If you want to gamble with margin trading, then why not declaring them casinos in the first place? 

No matter how those few "crypto-trading-firms" can be the worst, I'll go with responsibility above all principle, and disagree. Every single time in history, when regulators enter a field, it dramatically drops in novelty. Invite regulators inside, and expect things to go worse.

Sure, ensuring the exchange doesn't run a federal reserve system is good; but you're probably talking about more. Can you give a little bit more context? How interventional the state should be, when someone chooses to trade a bunch of shitcoins on Binance, for example?

[Alpha Marine]

The government is pushing the regulation of the exchanges for one purpose only.  They need to know the data on how much each user of an exchange is earning in order to tax them.  The government may make an excuse to execute the law by using the term anti-money laundering but it is just another world for tax evasion since laundered money are the money that are not taxed.

About exchanges, many exchanges are now offering both service of commercial and investment, we can see the service feature of exchanges like Binance, Houbi, Kucoin and many more.

I'm afraid I have to disagree that the only reason government regulates exchanges is so they can tax them. Exchanges are run by human beings and if human beings are not regulated they do whatever they want.
Government regulations are necessary to an extent. It's the same way the banking sector is regulated. There are a lot of reasons why exchanges should be regulated. Fraud is part of the reason.
The only problem is government use this as an opportunity to fight against crypto.

[Nwada001]

This is just the same as the difference between the features of centralized exchange and those of decentralized exchange.

You totally misunderstood my subject.
I described 2 kinds of exchanges, and both can be centralized or decentralized.

.I understood you correctly, unless your statement means a total different thing from what you mentioned above in your OP.
And I also don't think it's possible for Dex exchanges to fit in on your commercial exchange like you propose. Because being commercial and also being under any regulatory means there will be a user account that can be controlled, which they will require customers to register, funds that can also be staked, frozen, etc., any exchange that has any of the aforementioned features can no longer be considered a Dex. Or will your defined commercial not require all these things?

[CryptoHeadlineNews]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

So O.P, how about I say your thread is not complete, because after mentioning that we have two kinds of exchanges, I expected you to give an example which you failed to provide not even one, because by providing that I think it would have help people to understand more what you actually meant, of which I don't mind giving some examples which I stand to be corrected if I'm wrong, as it goes as follows;

Commercial exchange  (i.e they help people buy and sell coins)
1. Binance
2. Coinbase
3. Kucoin
4. Remitano
5. Bitstamp

Investment exchange (i.e They help people invest in several coins)
1. PancakeSwap
2. UniSwap
3. SushiSwap, e.t.c

Sorry, but you got it wrong.

Commercial exchanges are:

bitcoin.de
paxful.com

Investment exchanges are:

binance.com
coinbase.com

Okay. Thanks for the correction O.P, because the name Commercial & investment kind of got me confuse and i'm happy you were able to come clarify my doubt by listing the exchanges that falls within those category

[countryfree]

People are used to divide exchanges between centralized or decentralized, regulated or unregulated, let's forget all this.
There are exchanges which you can only use to buy or sell cryptos, the commercial exchanges, and then there are investment exchanges which want to keep your coins, because they propose you plenty of services for them.

Commercial exchanges are:

bitcoin.de
paxful.com

Investment exchanges are:

binance.com
coinbase.com
poloniex.com

A huge problem is that commercial exchanges are small low profit companies, whereas investment exchanges are making much more money, so some commercial exchanges are turning into investment exchanges. Kraken did that to give an example.

A commercial exchange is just like the currency exchange booth you find in all international airports. You exchange one currency with another. That's it. It's quick and safe. Use investment exchanges at your own risk.

[OcTradism]

A huge problem is that commercial exchanges are small low profit companies, whereas investment exchanges are making much more money, so some commercial exchanges are turning into investment exchanges. Kraken did that to give an example.

May you share more information about the Kraken changes from a commercial exchange to an investment exchange, please.

A commercial exchange is just like the currency exchange booth you find in all international airports. You exchange one currency with another. That's it. It's quick and safe.

You named investment exchanges like Binance and I know that you can exchange your bitcoin, altcoins to cash on Binance. Is it different from commercial exchange?

Quick  but safe or not, it will depend on your trading with your trade partners.

Use investment exchanges at your own risk.

If you don't own your private keys, it is always risk on any exchange.

[franky1]

alot of people here cannot even get the buzzwords right let alone associate the correct businesses to the correct buzzword

an investment company use terms like portfolio management not "exchange"
they use brokerage not "exchange" they use investment firm not "exchange"

so lets define 2 terms
portfolio managers (custodians of investment)
and exchanges(swap shops)

the latter would be a service of one currency in.. another currency out.. same day. no custodial service
the former would be a custodian. that allows buys and sells of multiple assets in and out interchangeably while still holding onto and being responsible of their customers value/security

there are not that many actual "swap shop" exchanges that are decentralised. but there can become some that offer instant swaps without long term custody services needed. and it can become its own industry.

however these swap shops would still need regulation because they are still a facilitator of finance(a money/currency business) thus still end up needing to KYC customers
however due to lack of custody service they wont need extra requirements like auditing customers holdings or insuring customer holding becasue its a straight trade in and out

where as portfolio managers would need extreme regulation to support their competence to manage and hoard customers value as well as needing regular audits and pay for insurances and security and other safe guards like having a customer service team for customers to actually contact

...
i know people will say "its bitcoin there should be no regulations" well that was true in 2009-2013 when bitcoin was not seen as a currency but as private property(asset) but now that its defined as a currency asset. currency laws started to apply.. and the only way to avoid it now is if it was challenged in court to redefine bitcoin as no longer a currency but again as a swappable/tradable private property. then without the currency jurisdiction currency laws wont apply. thus no regulations again

[KiaKia]

Nothing is fine here OP, why would the government feel the need to regulate crypto exchange? Forget what you know, we are talking about those who are in power and they are not benefiting from something that the entire world are investing their money on to make more money, yes the government will feel left out and unhappy.

Commercial exchanges are like those Paxful and some others that deal with gift cards and co but I don't see them ever doing do good in their business compare to investment exchanges, many commercial exchanges have been around before Binance came around and even small investment exchanges like Kucoin and others are doing well than commercial exchanges.

[countryfree]

alot of people here cannot even get the buzzwords right let alone associate the correct businesses to the correct buzzword

an investment company use terms like portfolio management not "exchange"
they use brokerage not "exchange" they use investment firm not "exchange"

so lets define 2 terms
portfolio managers (custodians of investment)
and exchanges(swap shops)

the latter would be a service of one currency in.. another currency out.. same day. no custodial service
the former would be a custodian. that allows buys and sells of multiple assets in and out interchangeably while still holding onto and being responsible of their customers value/security

there are not that many actual "swap shop" exchanges that are decentralised. but there can become some that offer instant swaps without long term custody services needed. and it can become its own industry.

however these swap shops would still need regulation because they are still a facilitator of finance(a money/currency business) thus still end up needing to KYC customers
however due to lack of custody service they wont need extra requirements like auditing customers holdings or insuring customer holding becasue its a straight trade in and out

where as portfolio managers would need extreme regulation to support their competence to manage and hoard customers value as well as needing regular audits and pay for insurances and security and other safe guards like having a customer service team for customers to actually contact

...
i know people will say "its bitcoin there should be no regulations" well that was true in 2009-2013 when bitcoin was not seen as a currency but as private property(asset) but now that its defined as a currency asset. currency laws started to apply.. and the only way to avoid it now is if it was challenged in court to redefine bitcoin as no longer a currency but again as a swappable/tradable private property. then without the currency jurisdiction currency laws wont apply. thus no regulations again

Thanks a lot franky1, at least someone who fully understands me.

Regulation is not really my subject, but there's no doubt it's needed. We don't want the FTX debacle to happen again. It would not have been possible if FTX had been a basic commercial exchange. Swap shop as you say. I used the terms commercial exchanges and investment exchanges thinking about the banking sector.

May you share more information about the Kraken changes from a commercial exchange to an investment exchange, please.

I just can't. I've used Kraken when it was a simple exchange, and someday I discovered they had turned into a cryptocurrency portfolio manager. Without any warning... That happened quite a while ago, though.

[Husires]

If cryptocurrencies develop so that exchanges can be decentralized between these currency pairs, all we will need is interfaces that work like banks to convert dollars or local currencies into cryptocurrencies.
Until this happens, users will move between centralized and decentralized platforms according to criteria such as their desire to verify identity, fees, liquidity,...etc.

Imposing regulatory restrictions on centralized exchanges is mandatory, but I do not see the possibility of regulating decentralized.

[Solosanz]

Commercial exchanges are:

bitvavo.com

Wrong, bitvavo offer staking program.

Staking Rewards
Bitvavo enables you to earn a return on your digital assets. Our staking service offers a yield of up to 8% on staked assets.

If you scared of FTX or Mt.Gox history, why it bothers you when you only use the exchange for trading? You deposit from your wallet to the exchange with high priority speed, your transaction will be included on the next block and your coins will arrive around 5-10 minutes. Then you sell your coins with the current rate and withdraw it into your wallet, maybe it takes 5-10 minutes. In short you just need to spend around 20 minutes, I don't think the exchange will get hacked during your trade.

If you worried the CEX will freeze your coins, just switch to DEX.

There's no rule to prevent CEX to not offer staking program, lending, or anything related to make more money.

[avikz]

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

It's good to define activities and separate entities based on the services they provide. It becomes easier for the regulators to regulate and protect the interest of the consumer.

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because most often they don't store any funds. You make a deal with them, and when it's over, the customer relation is over, everything's terminated.

Well, if these kinds of exchanges are not regulated, then the majority of the black money translations will take place here. In the cryptocurrency world, it's a big risk. Many governments have already raised their voices against money laundering risks. Non-regulation will just make it worse and more uncontrollable. If regulation is under consideration, both kind of exchanges need to be regulated.

[davis196]

We have about the same differences between commercial banking and investment banking, and there are many economists arguing about the need to separate (or unite) these 2 activities. We shall have the same discussion with cryptos exchanges.
Many legislators around the world are talking about regulating exchanges, this is what they should talk about first.

I don't get the point of your forum thread.
All crypto exchanges are regulated(or they should be). It doesn't matter if they offer just "crypto to fiat and vice versa" financial services or crypto trading/leverage/margin trading financial services. The authorities might distinguish them, but they are both regulated. In both types of crypto exchanges the users have to submit KYC verification, just like in all fiat financial services.
It doesn't matter if you are using a commercial or an investment bank, in both cases you have to submit KYC verification.
Separating the exchanges into different categories isn't our job. I guess that they are already separated by the regulators.

[countryfree]

Commercial exchanges are:

bitvavo.com

Wrong, bitvavo offer staking program.

Sorry, my mistake. I'll edit my post above.
I'm not afraid, it just makes sense for an individual to separate companies according to the service they provide.

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

It's good to define activities and separate entities based on the services they provide. It becomes easier for the regulators to regulate and protect the interest of the consumer...

That's my point!

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because most often they don't store any funds. You make a deal with them, and when it's over, the customer relation is over, everything's terminated.

Well, if these kinds of exchanges are not regulated, then the majority of the black money translations will take place here. In the cryptocurrency world, it's a big risk. Many governments have already raised their voices against money laundering risks. Non-regulation will just make it worse and more uncontrollable. If regulation is under consideration, both kind of exchanges need to be regulated.

Yes, it depends if you see the problem as an individual, or as a regulator, and what kind of regulations you expect.

To the individual, there's less risk of misbehaving with a simple commercial exchange.
To the regulator, it depends if the goal is to protect consumers, or fighting tax evasion.

[kryptqnick]

I usually use the first kind of exchanges, to be honest, as I don't need to store money on any centralized services and only transfer it when selling for fiat. There are still some risks here, as you can't be sure the exchange will follow through on their part, so some regulations are needed. But I agree with the op that the regulations should be harsher for those exchanges that hold the money of their clients, might use it for their own purposes (like FTX), and offer more services.
I think the names in the original post are a bit confusing, though, which is probably why many people won't get the difference right. I think I got it right, but only because I have experience with both types of platforms.

[tbct_mt2]

I usually use the first kind of exchanges, to be honest, as I don't need to store money on any centralized services and only transfer it when selling for fiat. There are still some risks here, as you can't be sure the exchange will follow through on their part, so some regulations are needed. But I agree with the op that the regulations should be harsher for those exchanges that hold the money of their clients, might use it for their own purposes (like FTX), and offer more services.

Regulations will become harsher certainly but if you use decentralized exchanges and store your coins in your wallets (non custodial), you will not have risk to lose your coins. In contrast, if you use centralized exchanges, you will have such risk and even bigger risk to lose your coins by harsher regulations that can cause drop in exchange trading volume, income, profit and might trigger collapses of bad centralized exchanges.

FTX is a very painful example of unbelievable terrible collapse of a Tier 1 centralized exchange. I did not think it can happen but after all with more information about their bad operations, their collapse makes sense.

[CryptSafe]

OP if I may ask you this question are you aware that these activities are all financial connected? Do you know that these activities are being monitored by the government for certain reasons? Do you realize that this opinion of yours some how dose not reflect a true exchange policy?

The government I think would not allow such to happen because they would want all financial activities be monitored under their raiders. Exchange that does only conversion of funds to token vice versa are still doing the work of p2p but the difference is that they are being monitored by the government to know the transaction details and for task payment as well likewise the trading aspect of it too. Differentiations in that manner would likely not be feasible because if the tendencies of the swap exchange arises to boycott KYC, the government would react and it would cause more harm than good. So bringing anything contrary to the already existing government standing order would hold no water.

[uneng]

Every crypto exchanges are going to be regulated, despite them being investment or just exchange platforms. I believe what can happen is that regulators take a milder approach regards the traditional exchanges which don't offer any additional services or products, what really makes sense, considering the currently risks regulators point out on exchanges where you can join staking programs.

If those programs and native tokens are nonexistent, they have no reason to be so harsh on their impositions, unless their main goal is to ruin crypto market and its entrepreneurs. On that case it would become quite obvious, leading to a loss of credibility on regulators' image.

[robattfield]

Should we apply the same rules, where 'normal exchanges' resemble commercial banks and high-risk exchanges mirror investment banks, is a reasonable consideration? Are not. Implementing stricter frameworks for high-risk platforms while allowing less regulation for 'regular exchanges' sounds reasonable.

The challenge, however, lies in whether traditional regulatory frameworks can effectively accommodate the unique characteristics and flexibility of cryptocurrencies. Cryptocurrencies offer significant potential for innovation, and simple duplication of existing regulations can stifle their development and impede their ability to transform. So the ultimate goal is to establish a regulatory environment that promotes responsible practices, protects investors, ensures market transparency, and meets the unique qualities of money. electronic.

[countryfree]

I usually use the first kind of exchanges, to be honest, as I don't need to store money on any centralized services and only transfer it when selling for fiat. There are still some risks here, as you can't be sure the exchange will follow through on their part, so some regulations are needed. But I agree with the op that the regulations should be harsher for those exchanges that hold the money of their clients, might use it for their own purposes (like FTX), and offer more services.
I think the names in the original post are a bit confusing, though, which is probably why many people won't get the difference right. I think I got it right, but only because I have experience with both types of platforms.

Yes, commercial exchanges, or simple swap shops. Investment exchanges or cryptocurrencies portfolio managers.
I wasn't sure what were the most correct words, but I hope everybody understood what I meant now.

There's no doubt regulations are coming, there already there in many countries, but regulators shall make the difference which I made. some easy KYC shall be all that's needed for swap shops, but big companies like Binance shall be much more tightly regulated.

[gunhell16]

We know that mostly in the field of cryptocurrency there are many users of exchanges that can really be said to be able to withdraw a large amount of money without seeing who made that transaction. And maybe this is one of the reasons why the country's government wants to know about it on exchanges like Kucoin, and Binance.

And the reason investors prefer to use exchanges is that their identity is hidden even if they make large transactions that do not involve the government. In short, traders remain anonymous using exchanges in the crypto business.

[FrozenBit]

Cryptocurrency exchanges have many differences between each other, and those with escrow operations, crypto lending and many other activities are receiving special attention in regulation. A number of countries have enacted regulations and laws to monitor the operations of cryptocurrency exchanges in order to protect investors. However, international regulation of cryptocurrency exchanges still needs more time for regulations to be developed and uniformly applied.
There are still risks when trading cryptocurrencies on exchanges, and investors need to do thorough research before making investment decisions. Investing in cryptocurrencies is a risky action and there is no guarantee of success. Therefore, I encourage investors to invest as much money as they can afford to lose if there is an unforeseen price change.

[franky1]

I don't get the point of your forum thread.
All crypto exchanges are regulated(or they should be). It doesn't matter if they offer just "crypto to fiat and vice versa" financial services or crypto trading/leverage/margin trading financial services. The authorities might distinguish them, but they are both regulated. In both types of crypto exchanges the users have to submit KYC verification, just like in all fiat financial services.
It doesn't matter if you are using a commercial or an investment bank, in both cases you have to submit KYC verification.
Separating the exchanges into different categories isn't our job. I guess that they are already separated by the regulators.

regulation is not just about "KYC"
yes with bitcoin defined as a currency then businesses offering services to move it are defined as financial businesses that should be regulated.. but there are many regulations. many policies and many services/features of regulations involved

for instance the difference between a non-custody swapshop. vs a custodial portfolio manager investment firm. is that the second version would need some CONSUMER PROTECTION INSURANCE

yep many dont realise that regulations are "suppose" to be to protect consumers. and so thats exactly what they should be.

EG
an insurance company can be part of a 5 of 6 multisig of an exchanges reserves cold wallet(3 exchange executives, 3 insurance agents). and for a premium insure that value should it get hacked.
with the insurer having control of collateral(exchange reserve decisions) the monthly premium can be quite low as its not simply able to be stolen internally by the portfolio manager, because the insurer has signing control over cold wallet->hotwallet movements which are audited

[irhact]

We have about the same differences between commercial banking and investment banking, and there are many economists arguing about the need to separate (or unite) these 2 activities. We shall have the same discussion with cryptos exchanges.
Many legislators around the world are talking about regulating exchanges, this is what they should talk about first.

All big centralized exchange in the market has this two quality so they fall into the category of be regulated. It would be great if we can separate this two types of exchange just as you said because they are tempting to newbies to us when combined. It's because the options of margin and future trading are available to everyone that's why we're having individuals losing money on this type of trading that they're not familiar with.

Those known commercial exchange should stop allowing  traders without any experience or proof to show that they're professional traders before they start trading using their exchange. If regulations comes then that should be one of the things they should be looking into to protect traders.

[countryfree]

for instance the difference between a non-custody swapshop. vs a custodial portfolio manager investment firm. is that the second version would need some CONSUMER PROTECTION INSURANCE

Juts like banks.

I don't have much money at banks, but I'm happy to know that if one of my banks goes bankrupt, I won't lose my funds, because there's a safety net to protect me. That safety net also includes substantial requirements for banks (well, not substantial enough in my opinion), to prevent bank managers from using customer's money to play Russian roulette with stocks.

[Myleschetty]

The may be good but it seems inappropriate to me and I think the cryptocurrency enthusiasts have to put an end to imitating the idea of the banking sector because already have enough crypto projects claiming to be decentralized where as they still operating in the bank sector way and enslaving the investment.
Enough of that what we have is CEX and DEX no Commercial or Investment exchanges

[Gyfts]

It seems people here aren't familiar with banking regulations, so I advise them to read the following:

https://en.wikipedia.org/wiki/1933_Banking_Act

Just as I approve those regulations on banks, I wish to get the same on exchanges. It would be good for us, as it would leave simple exchanges unregulated.

If you really want to see how stringent the regulations got, see what was passed after the housing market crash in 2008. You would be surprised at how much banks are able to get away with knowing they have federal regulators that will jump in if they need liquidity. As of March of 2020, U.S. banks literally can loan/invest 100% of depositor funds through the fractional reserve banking system -- they don't need to keep a single cent of client funds on hand. Doesn't sound like they're highly regulated with that type of freedom.

Be specific, what exact regulations are you suggesting? Establishment of an FDIC type insurance program?

[franky1]

If you really want to see how stringent the regulations got, see what was passed after the housing market crash in 2008. You would be surprised at how much banks are able to get away with knowing they have federal regulators that will jump in if they need liquidity. As of March of 2020, U.S. banks literally can loan/invest 100% of depositor funds through the fractional reserve banking system -- they don't need to keep a single cent of client funds on hand. Doesn't sound like they're highly regulated with that type of freedom.

Be specific, what exact regulations are you suggesting? Establishment of an FDIC type insurance program?

something that will break your mind
banks dont lend out depositors money.. .. are you shocked??

they CREATE money when they set up mortgages. yep thats right new money.
they were limited to only create new value to a ~% of inflation against total value on deposit.

thats where i think you got confused about the fractional reserve part. they dont borrow deposits. they create a X% of new value compared to deposits when they create mortgage loans
..

the other different "fractional reserve system" was something else. it was where when people deposit bank notes to get bank account balance..  those bank notes were to be burned when creating electronic account balance.
but banks then had to have small <10% (of the electronic bank balance) to hand in the form of new bank notes to honour account withdrawals. which is where the banks then bought (at face value) crisp new bank notes. which meant the US Mint(treasury) got money for the fractional reserve
however due to most people now using visa/mastercard for payments instead of cash via ATMS the % of fractional reserve has decreased to nearly nothing

the treasury(us mint) didnt like getting less and less income and are now making a CBDC to replace the need for banks and visa/mastercard where the treasury again takes more control of citizens accounts and takes any fee's or investment plans they can create from CBDC

and now you should be fully uptodate of how the system has and does and will work

[glendall]

It seems people here aren't familiar with banking regulations, so I advise them to read the following:

https://en.wikipedia.org/wiki/1933_Banking_Act

Just as I approve those regulations on banks, I wish to get the same on exchanges. It would be good for us, as it would leave simple exchanges unregulated.

everyone must have different opinions about banking, I think, where people switch to dicrypto investment because they are fed up with the government setting a wealth tax that is equal to people who have a lot of wealth with the wealth of small people,

[countryfree]

If you really want to see how stringent the regulations got, see what was passed after the housing market crash in 2008. You would be surprised at how much banks are able to get away with knowing they have federal regulators that will jump in if they need liquidity. As of March of 2020, U.S. banks literally can loan/invest 100% of depositor funds through the fractional reserve banking system -- they don't need to keep a single cent of client funds on hand. Doesn't sound like they're highly regulated with that type of freedom.

Be specific, what exact regulations are you suggesting? Establishment of an FDIC type insurance program?

something that will break your mind
banks dont lend out depositors money.. .. are you shocked??

they CREATE money when they set up mortgages. yep thats right new money.
they were limited to only create new value to a ~% of inflation against total value on deposit.

thats where i think you got confused about the fractional reserve part. they dont borrow deposits. they create a X% of new value compared to deposits when they create mortgage loans
..

the other different "fractional reserve system" was something else. it was where when people deposit bank notes to get bank account balance..  those bank notes were to be burned when creating electronic account balance.
but banks then had to have small <10% (of the electronic bank balance) to hand in the form of new bank notes to honour account withdrawals. which is where the banks then bought (at face value) crisp new bank notes. which meant the US Mint(treasury) got money for the fractional reserve
however due to most people now using visa/mastercard for payments instead of cash via ATMS the % of fractional reserve has decreased to nearly nothing

the treasury(us mint) didnt like getting less and less income and are now making a CBDC to replace the need for banks and visa/mastercard where the treasury again takes more control of citizens accounts and takes any fee's or investment plans they can create from CBDC

and now you should be fully uptodate of how the system has and does and will work

Yep, banks create money, and some people have tried to make the same thing with so called stable coins, which were supposed to be backed with hard currency (well, fiat currency, because the US dollar is not that hard...) but which were not.

Additionally, some investment exchanges have launched schemes where it is possible to borrow BTC. I would not bet (unless they become properly regulated) that these coins are fully backed with customer deposits.

That's another reason to stick to the simplest swap shops...

[Bananington]

The topic itself is decisive on its own for the simple fact that it clearly states the services in its terms.
Both commercial exchanges and investment exchanges should be best suited per individual need at the moment and not be a 'who does what best' kinda option in dire situations.
If an idea like this commercial exchange should last, it may be because it is fast, doesn't get congestion, strictly regulated , lower fees and a 24hour service incase I need to perform a transaction in the middle of the night. It is worse with region based service.

I also think an investment exchange serves across borders of both international and local transactions, like a dual purpose system where I can trade, invest, and exchange between currencies/swapping. If it is decentralized, it serves as the main reason for crypto existence, regulators need not be inclusive as it disrupts the truth in what decentralization stands for.
Both exists as it stands and it boils down to per individual decision on what serves best with consideration on safety, ease of use and anonymity.

[Blitzboy]

If you really want to see how stringent the regulations got, see what was passed after the housing market crash in 2008. You would be surprised at how much banks are able to get away with knowing they have federal regulators that will jump in if they need liquidity. As of March of 2020, U.S. banks literally can loan/invest 100% of depositor funds through the fractional reserve banking system -- they don't need to keep a single cent of client funds on hand. Doesn't sound like they're highly regulated with that type of freedom.

Be specific, what exact regulations are you suggesting? Establishment of an FDIC type insurance program?

something that will break your mind
banks dont lend out depositors money.. .. are you shocked??

they CREATE money when they set up mortgages. yep thats right new money.
they were limited to only create new value to a ~% of inflation against total value on deposit.

thats where i think you got confused about the fractional reserve part. they dont borrow deposits. they create a X% of new value compared to deposits when they create mortgage loans
..

the other different "fractional reserve system" was something else. it was where when people deposit bank notes to get bank account balance..  those bank notes were to be burned when creating electronic account balance.
but banks then had to have small <10% (of the electronic bank balance) to hand in the form of new bank notes to honour account withdrawals. which is where the banks then bought (at face value) crisp new bank notes. which meant the US Mint(treasury) got money for the fractional reserve
however due to most people now using visa/mastercard for payments instead of cash via ATMS the % of fractional reserve has decreased to nearly nothing

the treasury(us mint) didnt like getting less and less income and are now making a CBDC to replace the need for banks and visa/mastercard where the treasury again takes more control of citizens accounts and takes any fee's or investment plans they can create from CBDC

and now you should be fully uptodate of how the system has and does and will work

Indeed, banks' ability to create money via loans, not simply lending depositors' funds, resonates with me. Yet, remember, this sits within a governed system, vulnerable to issues like inflation if mishandled. The fractional reserve system, while partly correct in your depiction, lacks depth. True, banks hold a modest portion of total deposits as reserves, but it's more intricate than you suggest.

Regarding CBDCs, their ascent is noteworthy but not a game changer. They won't oust banks or decentralize currencies like Bitcoin. Cryptocurrencies offer an escape route from conventional finance, giving a financial autonomy that inherently centralized CBDCs may not rival.

[countryfree]

Now that the subject is pretty well explained, I'd like to see some BTC webzine making an article about it.
Come on, it happens some days that there aren't much news. Many bitcoiners need to know about it.