Cryptocurrency Regulation & Exchanges

Cryptocurrency Regulation: How to Stay Safe When You Trade Online

When you trade any form of currency online, the exchanges you use will abide by an agreed set of standards. Although the recent rise of cryptocurrency exchanges had altered the landscape slightly, financial regulations are still an integral part of the industry. To explain what we mean and how cryptocurrency regulation affects you, here are the facts:

Which Governing Bodies Regulate the Financial Industry?

When you trade online, each country will have its own governing body. For example, if you were accessing a US crypto exchange, the owners would be under scrutiny from agencies such as the Securities and Exchange Commission (SEC). Broadly speaking, in Europe, the majority of online trading sites are overseen by two regulators: the UK Financial Conduct Authority (FCA) and the Cyprus Securities and Exchange Commission (CySEC).

Although there are many other international governing bodies, the FCA and CySEC are the most important when it comes to regulated cryptocurrency trading. In fact, if you take a minute to read our eToro review, you’ll notice that it’s licensed by both agencies. This allows it to offer a mixture of tradeable commodities (crypto, forex and more) in both the UK and Europe.

Crypto Regulation vs. Traditional Financial Regulation

eToro crypto regulation
Know the difference between cryptocurrency regulations.

Know the difference between cryptocurrency regulations.

Perhaps the most important point to understand with regards to cryptocurrency regulation is the difference in rules applied to digital tokens and fiats. Put simply, because crypto trading is so new, traditional financial regulators haven’t caught up yet. In other words, FCA and CySEC guidelines don’t currently apply crypto trading or exchanges. Now, that’s not to say this won’t change in the future. However, right now, financial regulations only apply to trading sites that deal in traditional commodities.

The one important exception here is exchanges that offer crypto contracts for difference (CFDs). Also known as online brokers, sites such as eToro and 24Option allow you to speculate on the price of digital tokens such as Bitcoin (BTC). However, unlike a full cryptocurrency exchange like Binance, you can’t purchase the underlying asset (i.e. real digital tokens). Instead, brokers allow you to buy and sell virtual contracts known as CFDs. These contracts are covered by financial guidelines which, in turn, means you’re protected by the FCA et al when you trade cryptos in this way.

Therefore, in one sense, brokers do offer regulated crypto trading. However, that doesn’t mean crypto-only exchanges are unsafe. In fact, SEC has taken an active role in helping to regulate exchanges, while industry insiders have started to form their own set of standards. Additionally, banks and other financial institutions are also formulating guidelines designed to protect consumers. So, while cryptocurrency regulation may be evolving, you can still trade safely at every major exchange.

What Do Regulators Do and Why Are They Important?

As we’ve explained, financial regulators are there to ensure exchanges meet certain operating standards. On top of this, they also provide a point of recourse in the event of any problems. Finally, they also define and enforce compensation policies should fraud occur. Basically, financial regulators protect you, your personal details and your money at all times.

What’s more, you should see regulators as a seal of approval. If an exchange has made the grade with an agency such as the FCA, you can be confident it’s a high-quality platform that’s not only safe but financially stable. Therefore, if you want to make sure your investments are safe, always look for regulated cryptocurrency exchanges or those that follow the guidelines of international governing bodies.


Featured image: EtiAmmos /

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