Centralized Exchanges : What It Entails #006

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Hello crypto friends,

I trust you are doing perfectly fine and are enjoying your activities in the community today.

With a humble heart I happily come before this great community to discuss on an issue of great importance in the cryptospace.

Today, we shall continue our discussion on centralized exchanges.

We learnt that one of the challenges of a centralized exchange is that it is subjected to regulatory compliance, and we shall be discussing some of these compliances.

Join me as we begin

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KEY REGULATIONS OF CENTRALIZED EXCHANGE

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There are key regulations being put into place by the regular authorities and some of them are

• KYC AND AML:

AML which is an acronym for anti-money laundering can be explained to be set of rules, procedures and regulations designed to reduce illegal generation of income through different financial transactions

Financial businesses are often required to act in accordance to this AML rules inorder to detect and report suspicious financial transactions.

KYC which is an acronym for know your customer is another regulation that should be upheld by centralized exchanges.

This regulation requires users to input very sensitive personal information all for the sake of identity verification.

This information most times invade on the privacy of users of the exchange.

• LICENSING:

Another regulation being held by centralized exchanges is licensing.

Centralized exchanges are required to obtain licenses before they can operate as a legal entity and this often involves so many process and can interfere with user's privacy.

• REPORTING REQUIREMENTS:

Another regulatory requirement for centralized exchanges is that they are required to submit all trading activities to the regulatory authority.

With this, the regulatory authority can keep an eye on the trading activities of any individual and this does not respect the privacy of individuals as supposed.

• TAXATION:

Taxation is another regulation imposed on centralized exchanges that must be obeyed.

Depending on your location, users are often subjected to taxation on any trading activity they embark on.

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CONCLUSION

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We have examined some key regulations imposed by the regulatory authority on centralized exchanges.

And this is indeed a dis-advantage of a centralized exchange.

Please stay tuned as we shall discuss more