How to Choose an Exchange in the Crypto Asset Market. Part 2 — Jurisdiction
We continue publishing a series of articles on how to work in the crypto asset market. Practical lessons in a gaming form and training on historical data — both for beginners and professional traders — will be available in the summer of 2018 on SIMDAQ, our platform for democratization of the digital asset trading.
You may read the previous article of the series How to Choose an Exchange in the Crypto Assets Market. Part 1. Why a Size Is Not the Most Important Parameter.
If something in this article remains unclear, you may come in our community in Telegram, Twitter or Facebook and ask any question there. There are a lot of special tips in this new area, which we’ll share with you step by step.
Part 2. Countries and Regulations
The market of cryptocurrency exchanges overcame the initial stage of its development — the industry becomes more mature and transparent. Legal and technological branch standards of classical financial markets, such as rules “Know Your Customer” and “Anti-Money Laundering” (KYC/AML), are gradually being introduced. Many exchanges begin to receive the EU E-Money (electronic money) License, as, for example, Coinbase did.
In mid-April, the New York County District Attorney’s Office appealed to 13 large American cryptocurrency exchanges. Most of them expressed their readiness to talk about their activities and develop legal framework. To make sure the intention of the trading site to conduct an honest business, it is worth to look at the latest news and comments of its founders on legal and regulatory issues.
Jurisdiction is an important issue. If an exchange is registered in a country that has a developed legal system and is intended to constructive dialogue on the regulation of innovative financial and blockchain projects, this reduces a number of risks. Switzerland, Singapore and Great Britain belong to such countries. As a legal practice shows, if an exchange is based in one of the offshore jurisdictions, it will be more difficult to present claims to it or its founders and collect debts from it in a court of law.
Location in such countries with a strong legal system, but ambiguously related to the cryptocurrency market, as China or the USA, carries associated regulatory risks. Some exchanges in Japan and South Korea have restrictions on access to customers from other regions.
What does this mean for a customer
For a customer, an exchange’s jurisdiction and its adherence to legal standards in addition to assessing the overall level of reliability also means its practical consequences. This is the availability of an exchange requirements for the disclosure of a customer privacy when registering or withdrawing funds from the exchange, which may include providing document and photograph scans, restrictions on withdrawal amounts of funds or countries and banks where these funds can be withdrawn or taken, as well as limitations on the list of countries which customer an exchange is ready to serve.
Some customers get around country restrictions by using IP masking services. As for the processes of a customer’s authentication and verification during his initial registration or when withdrawing money, complications may arise at the moderation of a customer’s input data if an exchange’s employees or algorithms do not pass or recognize his data. In such a case, the speed and quality of the technical support service of the exchange takes an acute importance. You can get to know about this from user’s feedback on Reddit, Bitcointalk and other forums.
