How Unregulated Crypto Exchanges Grow
Since the unveiling of Bitcoin several years ago, the world of crypto has experienced quick growth. Nevertheless, guidelines have not been able to keep up, a common occurrence in new technology.
Besides allowing for innovation, the unregulated market made room for deceitful initiatives alongside genuine ones. Blockchain technology advanced fast, evoking interest in new financial products such as DeFi platforms and nonfungible tokens (NFTs).
The absence of regulatory barriers enabled developers to easily experiment and introduce new ideas to the market. Most retail investors did not wholly comprehend the risks and were attracted by the possibility of significant gains.
In the meantime, criminals such as money launderers and scammers leveraged the anonymity provided by blockchain technology. This promoted the ecosystem’s growth behind the scenes.
In the unregulated world, concerns regarding investor protection, market manipulation, and security played an unessential part. Mostly, unregulated platforms attract traders with promises of reduced fees, easy sign-ups, and anonymous trading, while regulated platforms need extra paperwork and have more fees because of compliance.
Identifying Unregulated Crypto Platforms
The major red flags to watch out for include:
Absence of regulation and licensing: Financial authorities regulated legitimate crypto platforms to ensure their adherence to legal standards. The risk of fraud is more significant in the absence of regulation.
Poor/nonexistent client support: Trustworthy platforms provide several contact methods, such as email, live chat, or phone support. People should avoid platforms whose response is slow or lack support.
Anonymous management: Trustworthy platforms should offer vivid information concerning their leadership and founders. Anonymous management can be a means to evade accountability.
Promises of unrealistic returns: People should be cautious of platform promises incredibly significant returns quickly. In most cases, scammers bait people with such promises and vanish with the funds.
For example, PlusToken was an initiative that promised 10-30% returns on investments but later vanished.
Pyramid schemes masquerading as referral programs: Pyramid schemes depend on an infinite stream of new users. The entire thing plummets after the stream dries up, leaving the last persons to join with significant losses.
Terrible reviews: People should check client feedback and reviews online. Platforms with numerous complaints or poor reviews on forums might have underlying problems they must be wary of.
Checking the reviews can offer insight into other users’ experiences and show possible issues with the platform.
The absence of KYC requirements: KYC verification is needed in genuine platforms to avert fraud. In case a platform skips this phase, there is a possibility it could be concealing something.
Additionally, the absence of KYC makes it harder to recover money in case things go wrong.
Assessing the Security of a Crypto Exchange
Security must be a primary priority when selecting a crypto platform. Some of the critical features to consider include:
SSL encryption: It safeguards the information sent between one’s browser and the platform. One must look for the padlock icon or ‘https://’ at the beginning of the web address.
Two-factor authentication (2FA): It includes an additional security layer to one’s account. A platform might be risky in case it does not provide 2FA or makes it difficult to set up.
Cold storage: A significant portion of reputable platforms’ funds are stored in cold storage, which is offline and less susceptible to attacks. One can check with client support or access the platform’s white paper for additional information.
No insurance or audits: Mostly, trusted platforms offer insurance against losses. Third-party organizations frequently audit them to ensure they meet security standards.
How to Evade Risky Crypto Platforms
The crypto space provides exciting opportunities. Nevertheless, in case one is working on unregulated platforms, they must be ready for considerable risks.
One can avoid the traps that most people fall into by being informed, doing due diligence, and checking for critical security features. One must also utilize crypto platforms they know they can trust.
A person can embrace the right precautions to safely navigate the crypto world and enjoy its benefits without being a victim of fraud or scams.
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