Topic: We shall separate commercial exchanges from investment exchanges - page 3. (Read 348 times)

Drawing crypto and banking parallels is quite insightful! 'Normal exchanges' mirror commercial banks, and high-risk ones reflect investment banks. Should we not apply similar rules to these crypto platforms? While 'regular exchanges' could use lesser regulation, high-risk ones require tighter frameworks! Universally accepted, right? But, here's the problem: Can traditional rules accommodate the crypto's fluidity? Given cryptos superior potential, duplicating regulations might restrict it! Thus, cryptos call for a sophisticated approach. The core challenge? Balancing innovation and investor protection. That's the pivotal issue, folks!

While this sounds like a pretty good idea, I don't think it will really be necessary. I don't think conventional banks and crypto exchange should be copying each other.

Centralized exchanges being regulated is not a bad thing, so many of them do shady things for profit and they control their customers' keys and personal data, if they are not regulated they can use this money and information in the wrong way.
There should be services people can use if they don't want to hand over their privacy to data farms, the government don't have to attack all the available services that provide privacy because they want to stop crypto money laundering, they know how easy it is for people to launder money with cash, so they know what the real problem is.
If it is a decentralized exchange like bisq, you send your money into a multi-sig wallet controlled by you and the other trader.

This is just the same as the difference between the features of centralized exchange and those of decentralized exchange. And so far as I know, I don't see anything different between them other than the name you want to give them; they all possess the same purpose. So you can just say centralized exchanges should be regulated, but decentralized exchanges should not, since they are not involved in any form of customer money control, nor are they there to lend out money or perform any similar banking service other than business as usual.
 
In as much as we all don't like the centralized exchanges, saying they should completely be regulated is absolutely out of the question for me, because it will make no difference. Aside from the taxes that the regulatory body will want to charge from customers, they will want to have full control over the exchanges, telling them what to do and what not to do at any given time, which will really inconvenience the way crypto currency is supposed to be used. If you want regulation and your finances to be controlled by government bodies, just stay with the banking system.

Regulating Exchanges only poses one advantage to the government which is the tax and that is not entirely bad. But the government regulating an exchange will somehow defeat the purpose of total decentralization of cryptocurrency. The government will definitely argue that they are after the citizen’s protection, I still think they just want to monitor people holdings because even banks that regulated the government still aren’t able to control the crimes or scams there. Moreover some countries government have made it clear that cryptocurrency is volatile and somewhat a Ponzi scheme, so I ask will this regulation make it less volatile?.

Just like others Exchanges mostly centralized ones that wants offer direct bank transfers should be regulated since they are involved in taking benefits from people like fees they charge but I wouldn’t advice any to keep there funds on them because it is regulated and the government feels they are secured after registering with them. FTX seems registered and yet they still got in a saga and people the government claim they protect are yet to recover there funds

Since the deal is coming from the bank don't involve yourself in such exchange Op, because bank will never say anything good concerning cryptos or give you anything that will benefit you in crypto exchange than to do things that will make you to feel what they are telling you is right in their sector. If Bank borrow you any digital assets, they will get something huge in return at the end of the exchange that will make you regret with the exchange deal.

It is true that there are two types of banking systems, one for investment banking and one for ordinary consumer banking. The products they offer are completely different from each other, and the regulatory requirements are also very different. I can understand the arguments that these two system should be kept apart from each other to reduce the risk for the customers. Investment banking is much more risky than the consumer banking that just offers loans and savings account. The thing is that traditional consumer banking seem to slowly disappear with technological advancements. Do we really need an institution in 2023 with many offices around the world and thousands of employees that only collects money and lends it out? The crypto community shows us that the is huge potential for p2p networks without a big institution in the middle. The problem I have with crypto exchanges just for buying and selling, and investment exchanges with more advanced products is that we usually want as many traders as possible on an exchange to get the best possible price. The higher the number of people buying and selling on an exchange the better it is to find a counterpart for our transaction. If we divide exchanges for their different purposes it could be hard to find some buyer or seller for our alt coins.

It seems people here aren't familiar with banking regulations, so I advise them to read the following:

https://en.wikipedia.org/wiki/1933_Banking_Act

Just as I approve those regulations on banks, I wish to get the same on exchanges. It would be good for us, as it would leave simple exchanges unregulated.

By you stating and interpreting commercial exchange and investment exchange the way you just did even if I don't think you are correct about the definition of both and I am open to further interaction with you here and maybe I would be able to understand you properly.

Okay let's put your explanation in context, you feel normal exchange only deals exchange of Fiat to crypto-currency and also the other way round. Well you would have made great sense if you have giving us some real example of this type of exchanges.

And also those exchange that has to do with trading and so on are to you called investment exchanges.

You said that the former doesn't need regulations and the later does need regulations, I would be very interested in knowing why you think so.
Exchanging funds like from fiat to crypto and vice versa is also as risky as trading. One of the purpose of regulation is to make a safe space for everyone and if you think regulations should be you self explained investment exchange then it should also be in the normal exchange.

The government is pushing the regulation of the exchanges for one purpose only.  They need to know the data on how much each user of an exchange is earning in order to tax them.  The government may make an excuse to execute the law by using the term anti-money laundering but it is just another world for tax evasion since laundered money are the money that are not taxed.

About exchanges, many exchanges are now offering both service of commercial and investment, we can see the service feature of exchanges like Binance, Houbi, Kucoin and many more.

I get what you're trying to put up here and for a while that has been the case with basically everything that could be traded in the market. A separate platform for exchange, and a separate one for investments. But there is a definitive reason as to why these two were merged into one eventually, and one of which is convenience, which is inarguably one of the best features one can offer as a platform.

"You entrust your money with us when you deposit the money you want to trade for other commodities, so why not cut the middle man, let you keep the fees you're going to pay for investing your money on a different platform, and just entrust it with us? That way you can conveniently manage all your tradings and holdings at the same time!" Is basically what happened in the past that led to this moment. Don't get us wrong, it is a system that is far from perfect, considering the numerous backlashes it has received over the years following the scandals that came up left and right, but it is a system that is welcomed by many and is a necessary one at that too. So as much as you hate the current paradigm, there's going to have to be some major shift in the convenience department of things before you could convince people and business entities in this industry to separate these two.

First we have to ask "why do governments regulate exchanges in first place?".
The answer is for a couple of reasons but the main one is to monitor people's financial transactions more. In simple terms: for more surveillance.
Now back to the quoted part, the government that wants to monitor how much money you have in a cryptocurrency and how much profit you make (to tax you) where your coins come from and where they go, etc. needs to enforce regulations (KYC and other restrictive measures) to gather information on you and monitor you better.

So because one exchanges your money and the other allows you to trade make them different in the view of regulation? Well, I don't agree with you, neither do I think any serious government will agree with you. Maybe the points below would change your view on this:

1. Have you forgotten that it's human beings you are dealing with? Crypto aside, it's a matter of time before they would hide under that to launder money.
2. When they are not regulated, how do they sincerely pay taxes despite making money from people?
3. What if they just disappear with the customer's money?
4. Even if they didn't disappear, don't you think they can still be cheating people when they are not answerable to anyone?

Regulation is not always bad, it helps the economy and protects the assets and rights of people. And every company dealing with money are entitled to be regulated, not otherwise.
 

This is far from a new idea, it's coming from the banking sector, and I believe it should suit cryptos exchanges just fine. Because there are 2 kinds of exchange.

A normal exchange is a company which exchanges fiat currency with cryptocurrency, and vice-versa, taking a small fee in the process. And that's it. Nothing else. I believe these exchanges hardly need to be regulated, because most often they don't store any funds. You make a deal with them, and when it's over, the customer relation is over, everything's terminated.

Besides that, there are exchanges which offer margin trading, which propose lending and borrowing cryptos, and various other high risk activities. Those exchanges need strong regulations, to protect investors.

We have about the same differences between commercial banking and investment banking, and there are many economists arguing about the need to separate (or unite) these 2 activities. We shall have the same discussion with cryptos exchanges.
Many legislators around the world are talking about regulating exchanges, this is what they should talk about first.