We shall separate commercial exchanges from investment exchanges

[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.