Why Are So Many Crypto Exchanges Unavailable in the U.S.?

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It’s all about cryptocurrency regulation.
regulation is a hot subject right now as countries around the earth grapple with ways to control the slippery beast that is cryptocurrency. The United States already has a number of rules in plaza, and is likely to introduce more. It is these existing regulations, both at a state and national level, that prevent many crypto exchanges from operating in the U.S. Exchanges have to register as money overhaul businesses ( MSBs ) and get money transfer licenses.

Some external exchanges have made the decision that the price and paperwork are n’t worth the effort. Others provide services that are n’t compatible with U.S. laws. here are some of the big stumble blocks for cryptocurrency exchanges in the U.S .

1. Know your customer (KYC) requirements

One argue authorities are concerned about cryptocurrency is that it is anonymous. The worry is that it can be used to finance crime or launder money from illicit activities. As a result, U.S. cryptocurrency investors need to fill in their personal information and frequently upload a photograph ID to set up an account. The challenge is that privacy and anonymity are part of the original ethos of cryptocurrencies. And both customers and exchanges get frustrated with the steps involved in rigorous know your customer ( KYC ) processes. For exemplar, exchanges may not want to manually check photograph identification and proof of address.

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2. Derivatives trading

Derivatives are complex fiscal instruments that let traders bet on the future price of a commodity. Traders can go abruptly ( bet on the price going down ) or long ( bet on the price going up ). Crypto derivatives are becoming increasingly democratic cosmopolitan, but it ‘s not something retail investors in the U.S. are allowed to access. respective cryptocurrency exchanges offer derivatives trade, including leverage and margin. Investors can use leverage to increase their buying baron. For exemplar, if you put down $ 100 at 5x leverage, you ‘d be able to take a $ 500 position. however, you ‘d besides take on a much higher risk, which is why there are restrictions on this character of trade. The U.S. wo n’t license cryptocurrency exchanges that offer derivatives trade to retail investors. Kraken used to offer limit margin deal to U.S. clients, but from June 23 ahead, only qualified investors can access this serve. ( qualify investors need to have more than $ 10 million in total assets. ) CoinBase Pro has besides disabled its allowance deal.

Binance, which has an international site and a U.S.-specific site, is under probe by the IRS and the Justice Department, who believe that U.S. customers are using the external web site for these types of trades .

3. Taxation and other reporting

Money service businesses need to keep detailed records and report any cash transactions over $ 10,000 to the IRS. U.S.-based exchanges with alien customers inactive need to track all customer natural process. U.S. authorities have crypto tax evasion securely in their sights, believing that millions of dollars worth of transactions are going unreported. Earlier this year, the IRS got a woo orderliness to obtain records from Kraken ; it has already taken exchangeable actions against Coinbase. The exchanges need to handwriting over data on U.S. taxpayers with crypto transactions that total more than $ 20,000. In the future, the government wants crypto transfers to be treated like cash. If new proposals are approved, any crypto transaction of over $ 10,000 would need to be reported .

4. State-specific regulations

different states have taken wildly different approaches to cryptocurrency rule. That ‘s why you ‘ll find certain cryptocurrency exchanges do not operate in every U.S. state of matter. Some, like Wyoming, Colorado, and Ohio, have introduced crypto-friendly laws, as they want to attract the burgeoning cryptocurrency diligence. Others, like New York and Washington, have strict crypto requirements. New York has led the way in crypto regulation. Its BitLicense controls how exchanges store currentness and which coins exchanges can trade. Many believe New York ‘s framework will be used as a basis for stricter federal regulation .

Can non-licensed exchanges still operate in the U.S.?

One of the many challenges in cryptocurrency regulation is that it is a global industry, and engineering makes it easy to entree services from all over the universe. As such, some U.S. consumers use services that are n’t licensed as MSBs. The U.S. is cracking down on this type of bodily process and will likely ramp up its efforts in the future. At the end of survive year, the Commodity Futures Trading Commission ( CFTC ) took legal action against crypto rally BitMEX — which is not licensed in the U.S. — for allowing U.S. customers to use its serve. It may be tempting to circumvent the rules and use non-U.S. accredited services, but it ‘s besides bad. Exchanges may freeze access to customer accounts, authorities are actively pursuing crypto tax evasion cases, and consumers wo n’t have the same protections. As cryptocurrency investors, we have to accept that regulation is inevitable. As the industry continues to grow, regulators wo n’t merely turn a blind center, tied if their actions go against the spirit in which Bitcoin was founded. And careful regulation is not necessarily a bad thing. It can protect against bad players and stop us from unwittingly supporting criminal activities.

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source : https://ontopwiki.com
Category : Finance

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