Is It Time to Regulate Crypto Exchanges?

Yes, it’s about time. Now more than ever, crypto regulators need to walk the talk.

Discussions around having regulated crypto exchanges are not new to the industry. A March 2019 report by a London-based regulator called Coinfirm revealed that out of the 216 crypto exchanges globally, only 14% are regulated. That means that another batch of about 186 operates without licenses from regulators.

With freedom comes responsibility, but if you can’t be responsible, then you can’t have freedom either. We’ve seen all manner of frauds perpetrated by hackers and attackers, substandard programs, as well as owners of exchanges leading to loss of millions of dollars in investment. But perhaps the increased cases of cryptocurrency pumping and dumping are of more concern to many.

Some of the big industry players such as Binance have been victims of the pump and dump schemes. Using platforms such as Telegram, the perpetrators create hype around their projects to groups of unsuspecting investors who end up buying the tokens or coins.

The main purpose of a pump and dump is to cause an exaggerated demand for a project and once the price hits the target point, owners sell off their assets making a profit as the coin/token demand and price drastically drop. When that happens, innocent investors end up losing money, or at the very best, they end up selling the coins or tokens at the initial cost.

At this point, one is left wondering where the regulators are because. In the real sense, financial fraud is a crime whether it takes place on a regulated or non-regulated exchange. So, unless something is done, things are bound to get messier and noisier, with more casualties.

Where are Regulators?

As mentioned before, one may be mistaken to think that the unregulated faction of exchanges is free to get away with “murder”. But far from it. All financial platforms are under obligation to conduct their business in accordance with the laws of that land. The law is always clear, fraud of any manner is punishable.

So, where exactly are regulators such as SEC, AUSTRAC, and FINTRAC in all these? Is someone sleeping on the job?

If major cross-border criminals can be nabbed and locked up for two or more lifetimes, why can’t less organized crimes such as the ones seen in the crypto space be stopped?

The process of controlling the sector is not such a complicated one. For starters, the regulators need to gather intel for all Telegram groups involved in crypto activities, including personal data of the organizers. Similarly, information regarding the participants of any such projects should also be taken note of.

But as you would expect, Telegram’s data encryption and privacy policies may be a huge hindrance to accessing such info. From here, the only other way is through the exchanges.

Regulated Crypto Exchanges

Now, if you’ve used Telegram, you’ll notice that their security features are quite airtight, perhaps the reason as to why many crypto fraudsters prefer it. While these security controls safeguard the data of the users, they may also hinder regulating bodies from accessing any such data.

However, exchanges (regulated ones) offer a gateway to nabbing fraudulent activities. Consider the case of Binance. Today, the exchange is believed to be one of the most affected when it comes to pumping and dumping.


Because despite being a huge player, Binance remains unregulated (unlicensed).

But you might ask – would things have been any better if licensed? Of course, they would.

And here’s why…

As an unregulated exchange, Binance is not obligated to assist its users or investigative units in any way in case of fraud. That is why most criminals can easily get away with financial crimes, walking away millionaires.

Now, don’t get this wrong, there are genuine crypto millionaires out there who have made an honest earning, but if asked, they’d tell you how they went through hell and back before they got there.

But things don’t have to remain the same. No one needs to go through hell to earn a million bucks off digital assets.

The trust issues in the crypto space can be fixed with proper regulations.

If you think of it, pumping and dumping increase user activity, thus boosting liquidity. Obviously, with more liquidity comes more money for the exchange. It is believed that this is one of the reasons why most exchanges are reluctant to truly help fight this menace.

So, what’s the takeaway?

Change Is Here

All industry players need to rally behind the common goal of regulating the sector. Clearly, having less than 20% of exchanges registered is not the way to grow the sector. If a proper framework can be adopted, cryptocurrencies and related assets have the potential to change the financial ecosystem as you know it.

As such, countries must resolve to protect their investors and exchanges will have no choice but to follow suit. But until that happens, the chorus will go on as investors continue to lose their hard-earned monies in dubious projects.

Image by Csaba Nagy from Pixabay

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Rene Peters
Rene Peters

Rene Peters is editor-in-chief of CaptainAltcoin and is responsible for editorial planning and business development. After his training as an accountant, he studied diplomacy and economics and held various positions in one of the management consultancies and in couple of digital marketing agencies. He is particularly interested in the long-term implications of blockchain technology for politics, society and the economy.

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