Crypto exchanges are regulated entities. This is shown as proof of trustworthiness by the crypto industry. However, the regulations to which crypto exchanges have to comply are completely outdated and inadequate.
In the United States, crypto exchanges have to register with the FinCEN as “money transmitters”. It’s a category within the Money Services Business (MSB) classification, which encompasses activities such as broker dealer, forex operators, or cashiers. The crucial part is that MSBs in general and money transmitters in particular are subjected to much less stringent AML/KYC regulations than banks. In the case of crypto, this is ludicrous.
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