Javier Paz There are nearly 600 cryptocurrency exchanges worldwide inviting investors to trade bitcoin, ethereum and other digital assets. But costs, quality and safety vary widely. With an emphasis on regulatory compliance, here is Forbes Digital Assets ranking of the top 60.
Editorial contributors: Nina Bambysheva, Michael del Castillo, Steven Ehrlich, Matt Schifrin
W hile blockchain technology is being embraced by corporations around the world ( see Forbes Blockchain 50 ) there has likewise been a boom in outfits that allow investors to buy, sell and store cryptocurrencies. Despite the sector being little more than a decade old, CoinGecko.com reports that there are no fewer than 580 independent crypto exchanges allowing investors to trade virtual currencies. In fact, in the last quarter of 2021, websites of dedicated crypto exchanges received 1.7 billion visits according to SimilarWeb data collected by Forbes.
For uninitiated crypto investors, distinguishing quality providers from those that appear to be reputable because of a slick website or famous spokesperson, is nearly impossible. Even exchanges with heavy trading volume in a particular cryptocurrency or pair of cryptos, is a faulty indicator of quality, because in an environment teeming with unregulated providers, it is relatively easy for exchanges to simply report fake numbers.
To help investors navigate the world of buying and selling bitcoin, ethereum and other cryptocurrencies, Forbes Digital Assets analyzed 60 of the largest crypto exchanges ranking them according to ten different criteria (see Ranking Methodology below) ranging from cyber-security provisions and trading fees to institutional backing and regulatory compliance, which we weighted more heavily. At the start of January, the 60 exchanges on our list were generating more than $100 billion in trading volume per day, representing the majority of crypto trading volume globally.
Ten of the exchanges on our list, names like Coinbase, Gemini, Kraken and FTX.US, are most compliant from a regulatory standpoint and thus considered “Class A” according to our survey. Fourteen of the firms we analyzed— companies like PayPal, Robinhood and Block— offer crypto trading, but it isn’t their main business. We dubbed these firms Class B firms. Class C firms are regulated at the national or regional level like Korea’s Coinone, Singapore’s Luno and Mexico’s Bitso. Two larger firms that fall into Class C are FTX and Binance because they are not yet as well regulated as Class A exchanges. Class D exchanges, according to our survey, have websites with legal agreements and registrations in places like the Seychelles and Hong Kong that convey to visitors the sense that these firms are regulated, but business registration is not the same as regulatory compliance. We consider Class D firms like Bitfinex, Kucoin and Gate.io to be largely unregulated.
Unlike traditional financial services, the crypto exchange industry generally lacks standards to certify a new entity before or after they start soliciting client funds. In the United States there is no member organization like FINRA to self-regulate crypto-exchanges despite the fact that from a customer standpoint these exchanges function very similarly to broker-dealers like E-Trade or Schwab. To our knowledge, only Japan has a self-regulating industry group that checks a firm’s basic governance, operational competence, and ensures exchange officials or owners are not individuals with a history of misdeeds or even criminal records. For this reason, our new global ranking puts a heavy weighting on regulatory compliance.
One reason that there are more than 600 crypto exchanges has to do with the industry’s low barriers to entry. There are numerous white-label technology firms around the world like Cyprus-based B2Broker, New York City’s Alphapoint, and London’s GCEX that offer aspiring entrepreneurs the software and data needed to get started with a cryptocurrency exchange. Sometimes the cost for such software is no more than $5,000 a month. The administrative part of any new crypto exchange launch – the website, the legal set up, and the financial connections tend to be a minor cost. Sometimes companies need to do little more than register the business in a small island country such as Saint Kitts or Samoa, and hope that they manage to steer clear of regulators like the SEC and the CFTC.
Another potential trap for investors is relying on the “trust scores” or “exchange scores” on popular price and data sites like CoinMarketCap and CoinGecko.com (see below). These websites are often compensated for the customers they generate via links to crypto exchanges, so these so-called rankings often involve minimal vetting from a quality and safety standpoint.
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