The crypto exchange selection: TOP 5 recommendations from lawyers
CoinPulse, Liqui, Kvadriga, Coinbin — this list could be easily extended. From the end of the year, 2018 cryptocurrency exchanges have been closing with almost a monthly frequency. Declared reasons for such closures could be very different, from the common lack of liquidity to a “sharply revealed” shortage of balance or the mysterious death of the founder. But not depend on the reasons, the general trend is clear — the number of cryptocurrency exchanges is steadily decreasing.
It seems that in a situation of exchange closure you can easily transfer the virtual assets to another platform and trade further. In general, that should be like that, but reality could be much trickier. In case of the closure or suspension of operations, exchanges often do not have enough resources on their balances to fulfill obligations towards its users. For example, currently, Juscutum blockchain practice is providing support to the client who was faced with cryptocurrency exchange insolvency.
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In light of stated above, Juscutum blockchain practice prepared a few simple tips that will help you to choose a safety cryptocurrency exchange with the low risk of future problems occurrence.
- Trade only on world-leading platforms
One of the simplest advices, but, nevertheless, very relevant. We recommend to only work with well-known global exchanges (for example, you can choose a platform from the list of TOP-20 exchanges by trading volume).
2. Give preference to a licensed platform
The occurrence of license or authorization from a state regulator Is a very positive signal for a user (for example, Coinbase has obtained licenses in many US states, Bitstamp is payment institution authorized and regulated by the Luxembourg financial regulator). Regulated platforms have already passed a tough governmental inspection procedure and proved their “good faith” and “transparency”, therefore the level of trust to them is definitely higher.
3. Use exchanges from a respected jurisdiction
When choosing an exchange, it is important to pay attention to its jurisdiction of incorporation. Respectable jurisdiction (EU or USA) is a significant plus and a good indicator, at the same time the existence of an “island registration” is a red flag.
4. Start the platform usage only after thoroughly familiarizing with the terms of the services provision
Take your time and familiarize yourself with the documents posted on the exchange website, first of all, we recommend you read the Terms of Use, as well as the AML/KYC policies. Failure to follow with this recommendation can latterly lead to unpleasant consequences. For example, at the most inappropriate moment, you can find out about some hidden withdrawal limits or fees for inactive usage of your account, or even that the exchange freezes your assets due to a violation of the Terms of Use or the AML policy.
5. Check the exchange through the Crypto Exchange Ranks powered by Hacken
The CER could be a useful tool in the process of exchange selection. On the CER project website, you can find a cryptocurrency exchanges rank. The CER rate is based on an overall assessment of exchanges, which is held on the meringue of such criteria’s as liquidity, cybersecurity, public opinion and withdrawal& limits.
Nikita Novikov, Associate in Juscutum Blockchain Practice
Oleksandr Synytsia, Junior Associate in Juscutum Blockchain Practice
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