You’re about to embark on a cryptocurrency journey and are looking to buy your first digital tender.
You’ve done the research and know which tokens tickle your fancy and have decided on the one. Now you’re ready to buy.
Except you’re not. Not yet.
You see, you might have decided what to buy, but you haven’t decided how or where to buy it.
The how and the where are wrapped up in one neat bundle: cryptocurrency exchanges.
What is a cryptocurrency exchange?
Cryptocurrency exchanges are like cryptocurrency’s version of a stock exchange; buyers and sellers are offered a platform to trade different assets which with their valued based on the current market prices. Typically, the exchanges offer conventional fiat-to-crypto transactions as well as offering crypto-to-crypto trades. For example, on South-African based exchange Coindirect, a customer can buy Bitcoin with US Dollars or can trade their Bitcoin for Ripple’s XRP.
What are the types of exchanges?
There are three types of cryptocurrency exchanges:
Trading Platforms: Platforms which connect buyers and sellers to one another.
Brokers: Platforms which sell cryptocurrencies at a price set by the broker. These acts similarly to service providers dealing with Forex.
Direct Trading: Platforms which offer direct peer-to-peer trading. This allows users to exchange currencies across the world and the seller and buyer settle on a price.
What are the requirements for cryptocurrency exchanges?
In order to be allowed to exist and operate, a cryptocurrency exchange needs to adhere to the laws of the country. These laws differ from country to country but generally follow regulations related to the protection of the customer.
Two of these are important in most countries:
- Anti-money laundering (AML) laws;