What is an Exchange
A cryptocurrency exchange is an online platform that facilitates the buying, selling, and trading of cryptocurrencies. It serves as a marketplace where users can exchange their traditional fiat currencies for various cryptocurrencies or trade one cryptocurrency for another.
The primary purpose of a cryptocurrency exchange is to provide a secure and efficient platform for users to engage in digital asset transactions.
There are 2 main types Centralised Exchanges and Decentralised Exchanges. To learn more about the key differences between what a centralised exchange is and a decentralised exchange, see here.
Key features of Centralised Exchange
Features | Breakdown |
Trading Pairs | Exchanges list various trading pairs, representing the combinations of cryptocurrencies that users can buy or sell. |
Order Book | The order book is a real-time, continuously updated list of buy and sell orders on the exchange. It displays the prices and quantities at which users are willing to buy or sell a particular cryptocurrency. |
Market Orders and Limit Orders: | Users can place market orders, where they buy or sell a cryptocurrency immediately at the current market price.
Alternatively, they can place limit orders, specifying the price at which they want to buy or sell, and the order is executed when the market reaches that price. |
Fiat-to-Crypto and Crypto-to-Crypto Exchanges: | Some exchanges allow users to trade cryptocurrencies directly for traditional fiat currencies, while others only support trading between different cryptocurrencies. |
User Accounts: | To use a cryptocurrency exchange, users typically need to create an account. This account allows them to deposit funds, track their transactions, and manage their cryptocurrency holdings. |
Security Measures: | Security is a critical aspect of cryptocurrency exchanges. Reputable exchanges implement robust security measures, including encryption, two-factor authentication, and cold storage (keeping a significant portion of funds offline) to protect user assets from theft or hacking. |
Fees: | Exchanges charge fees for their services, usually as a percentage of the transaction value. Fee structures vary between exchanges and can include trading fees, withdrawal fees, and others. |
Liquidity: | Liquidity is the ease with which an asset can be bought or sold in the market without affecting its price. Exchanges with higher liquidity tend to provide better trading experiences for users. |
Regulatory Compliance: | Depending on the jurisdiction, exchanges may need to comply with specific regulations. Some exchanges require users to complete Know Your Customer (KYC) verification to comply with anti-money laundering (AML) regulations. |
Educational Resources: | Many exchanges offer educational resources, including tutorials, articles, and webinars, to help users understand how to use the platform and navigate the cryptocurrency market. |
Cryptocurrency exchanges play a central role in the cryptocurrency ecosystem by providing a platform for users to participate in the buying, selling, and trading of digital assets.
Compliance requirements of Centralised Exchanges
Centralised exchanges are normally required to comply with local government regulations. This is because in most countries cryptocurrency is consider a financial asset or a commodity, which means that local regulators are required to abide by anti-money laundering and consumer protection requirements.
How does tax work with Centralised Exchanges and Cryptocurrency
Many companies are different in their tax regulation and laws. For further information we have partnered up with Rampable to provide information per Country. This is an ever expanding list:
Country | Tax Regulation |
India | If cryptocurrency is used as an investment, then it is subject to capital gains tax.
If cryptocurrency is used as a currency, then it is subject to goods and services tax (GST)
Learn more |
Thailand | If cryptocurrency is used as a currency, then it is subject to value-added tax (VAT).
Learn more |
Malaysia | Cryptocurrency is not taxed in Malaysia
Learn more |
Vietnam | Cryptocurrency is not taxed in Vietnam
Learn more |
Singapore | Cryptocurrency payments are liable for GST, and trading profits are taxable on income
Learn more |
Indonesia | Cryptocurrency has a VAT and income tax of 0.1% respectively
Learn more |
What is Xellar?
Xellar is the next generation non-custodial application, integrated into the DeFi world. Download Xellar on the App Store & Play Store. Integrate with Xellar’s cold wallet technology.
