Exchanges are often in the news, either due to listing of new crypto / ICO token; customer service issues or loss of crypto due to hacking.
There have been numerous exchange hacks in the lifetime of Bitcoin with the most famous one being Tokyo based Mt.Gox where approximately 850,000 bitcoins belonging to customers and the company were missing and likely stolen from their hot wallet. Hot wallets are connected to the internet and as a result, vulnerable to hacking. This was an amount valued at more than $450 million at the time.
Recently, Japanese cryptocurrency exchange CoinCheck lost NEM to the value of $530 million in a late-January 2018 theft. This sent shockwaves through the crypto community however, on 8 March 2018, the CoinCheck executives announced their plans to start paying back all affected customers as well as resume services for some cryptocurrencies from next week.
Ironic that both these exchanges have connections to Japan, however, hacking of exchanges can happen anywhere. Other exchanges have been hacked too, for example, the Bitfinex exchange based in Hong Kong lost 120,000 BTC which was worth $72 million at the time in 2016, and, Slovenian based Bitstamp was hacked and 19,000 bitcoins, worth of $5 million, in January 2015.
Crypto criminals have stolen more than US $900 million in 2018 and these criminals have yet to be apprehended. Reported crypto crimes of 2017 totaled $266 million. Click here for more detail: VIDEO
In an attempt to protect consumers, the SEC has issued a statement to assist in the identification of potentially Unlawful Online Platforms for Trading Digital Assets. Below is the list of questions an investor or trader should ask before investment or trading commences.
- Do you trade securities on this platform? If so, is the platform registered as a national securities exchange
- Does the platform operate as an ATS? If so, is the ATS registered as a broker-dealer and has it filed a Form ATS with the SEC
- Is there information in FINRA’s BrokerCheck ® about any individuals or firms operating the platform?
- How does the platform select digital assets for trading?
- Who can trade on the platform?
- What are the trading protocols?
- How are prices set on the platform?
- Are platform users treated equally?
- What are the platform’s fees?
- How does the platform safeguard users’ trading and personally identifying information?
- What are the platform’s protections against cybersecurity threats, such as hacking or intrusions?
- What other services does the platform provide? Is the platform registered with the SEC for these services?
- Does the platform hold users’ assets? If so, how are these assets safeguarded?
Full SEC Statement – Click Here
Learn more about how to store your cryptocurrency safely – Click Here