A Cryptocurrency Exchange (Crypto Exchange), also sometimes referred to as a Digital Currency Exchange (DCE), is a business that allows its client to trade either cryptocurrencies or digital currencies in exchange for other types of assets. These are generally FIAT money or alternative crypto/digital currencies.
Crypto Exchanges can take two forms. They can either be a market maker, who earn commission from the bid-ask-spreads or, they can operate as a type of matching platform, where they ask for set fees in return for their services.
These exchanges can either operate within the traditional business model of having offices in set locations, where clients can walk in and conduct their business, or they can be strictly online businesses where they gain their client base through the internet.
In the office format, they can exchange traditional methods of payment and digital currencies whereas, if they are an online business, they will exchange money that is transferred electronically, along with digital currencies.
It is common for Crypto Exchanges to operate in countries outside of the Western world, due to more relaxed regulations on trading, that can allow them to operate their business more smoothly.
Despite this, they will still trade in Western currencies and will maintain bank accounts in these countries, so that they can deposit funds in a variety of different, popular currencies.
Some exchanges will accept credit card payments, wire transfers or other, more uncommon forms of payment in exchange for cryptocurrencies.
At the time of writing (November 2018), cryptocurrency and regulations on the exchange of digital currency are still very unclear in many developed nations. This is because financial regulators are still going over their options, with regard to how they can handle these issues. Many of the proposed measures have not been tested for validity and until a point where they have, it is unlikely the regulatory field will change in the short term.
Exchanges can send their traded cryptocurrencies directly to the cryptocurrency wallet of the purchaser.
The creators of cryptocurrencies and digital currencies are usually independent of the exchanges that allow them to be traded. One of the ways in which this can work is that digital currency providers (DCPs) are businesses that will bookkeep and act as administrators for their customer accounts but, will not directly grant currencies to the customers themselves.
Customers will buy and sell their cryptocurrencies and digital currencies from the exchanges, who will then transfer the currency either in, our out of the individual’s DCP account.
Some exchanges are in fact, subsidiary companies of DCPs however, the majority of exchanges function as fully independent businesses in the legal context.
Near the start of 2018, Bloomberg News issued a story, reporting on the largest cryptocurrency exchanges in the world. They issued their estimates based on information provided by CoinMarketCap.
The following, are some of the largest estimated cryptocurrency exchanges, based on the report:
–Binance (Hong Kong)
–Bittrex (United States)
Interestingly, a study from Mistertango reported that 88% of cryptocurrency exchanges have favorable views on regulation within the industry due to the fact that regulation would provide more certainty to business operations and would also lead to an increase in the stability of cryptocurrency prices.