Why is “risk control” the key to crypto exchanges?

With the continuous development and improvement of the cryptocurrency industry, risk control capabilities will become one of the core competitiveness of the development of cryptocurrency exchanges. Whoever can master this “critical gate” will stand out from the competition.

If I ask you: what are these traditional financial institutions operating in banks, stock exchanges, insurance companies?

How would you answer?

Is the bank dealing in banknotes? Are securities companies operating stocks? Is the insurance company operating an insurance policy?

No, in fact, they are all operating one thing-credit.

Credit means everything.

So, how can a financial institution have enough credit or credibility? There is only one answer: risk control! Because only by effectively controlling risks can users and consumers be fully protected, and only when users and consumers truly feel that they are protected can they “Put Trust In You”!

From traditional finance to cryptocurrency: the importance of risk control continues to expand

In fact, risk control has always been the top priority in the traditional financial field, but as we gradually enter the digital age, cryptocurrency and blockchain technology have gradually emerged, and risk control over cryptocurrency transactions has also begun to arouse more and more people Attention-As a core part of the ecosystem, the importance of exchanges in the risk control of cryptocurrencies is self-evident.

On August 3, the official website of the US Securities and Exchange Commission published a speech by Gary Gensler, the chairman of the agency, at the Aspen Security Forum, which specifically mentioned the risk control of encrypted trading platforms. Gary Gensler said:

“The crypto-finance world now has platforms where people can trade tokens and other places where people can lend tokens. I believe these platforms can not only involve securities laws, some platforms may also involve commodity law and banking law. In addition, with investors Unlike other trading markets that trade through intermediaries such as the New York Stock Exchange, people can trade on a cryptocurrency trading platform without a broker — 24 hours a day, 7 days a week, from all over the world.”

It can be seen that in the eyes of the chairman of the US Securities and Exchange Commission, cryptocurrency exchanges need to be regulated by securities laws, even commodity laws, and banking laws like traditional financial institutions such as the NYSE. This means that the NYSE’s To what extent should the risk control be achieved, and to what extent should the risk control of cryptocurrency exchanges be achieved, but do cryptocurrency exchanges really have this level of risk control capability?

Frankly speaking, due to its early stage of development, the cryptocurrency industry does give people a mixed feeling. According to the latest data from Coingecko, there are currently more than 400 spot cryptocurrency exchanges, large and small. Therefore, many “novice users” who have just stepped into the cryptocurrency industry often hear the advice: “Don’t be in the unknown. Exchanges should choose large-scale cryptocurrency exchanges with word-of-mouth and brand names for trading.”

This argument makes sense, because the risk control capabilities of most cryptocurrency exchanges are not satisfactory. Only “HBO” (Huobi, Binance and OKEx) and a few top cryptocurrency exchanges such as Coinbase have it. Sufficient risk control awareness, risk control technology and risk control methods.

Comparing the risk control measures of several top cryptocurrency exchanges in the market, you may find that some cryptocurrency exchanges may only have a certain KYC compliance strategy, while some exchanges choose to implement different compliance at different stages Strategy. In fact, there are not so many exchanges that can comply with “KYC is required to perform cryptocurrency deposits, withdrawals and transactions”. Only a few such as Huobi and Coinbase can meet this standard.

Why is "risk control" the key to crypto exchanges?

(The information comes from the Internet)

If a cryptocurrency exchange wants to gain user trust, the risk is the fate-whether risk control is adequately done and whether execution can keep up with market changes is definitely the key to testing the professionalism of an exchange. There is no doubt that Huobi has used time to prove itself.

The core of risk control of crypto exchanges: protecting users

Although many jurisdictions do not allow the establishment of cryptocurrency trading platforms, it is not illegal for individuals to buy and sell “specific virtual goods” such as Bitcoin, and normal digital asset buying and selling is also regarded as an autonomous civil action at their own risk. In this case, exchanges in the “C position” of the cryptocurrency ecosystem must assume the responsibility of protecting users.

According to FATF’s “40 Recommendations” and other traditional financial regulatory regulations, mainstream cryptocurrency trading platforms have the responsibility and obligation to conduct a comprehensive anti-money laundering review of users.

On the other hand, although traditional finance and cryptocurrency industries are well aware of the importance of risk control, risk control is sometimes a “double-edged sword” for cryptocurrency exchanges, and it can often bring careful care to users. But sometimes it is easy to cause a lot of misunderstandings. Especially in the process of iterative upgrades of risk control capabilities and technology, it is inevitable that users will be accidentally injured (account frozen).

In order to deal with such problems, all major exchanges have actually set up complaint channels and feedback mechanisms. For example, Huobi has set up an anti-money laundering security questionnaire channel. Even users who have been accidentally injured can always add information to prove that they can apply for lifting the restrictions.


As an emerging trading platform, cryptocurrency exchanges have long been criticized for lack of supervision and industry self-discipline. Even though certain exchanges in this field are performing well at present, on the whole, cryptocurrency exchanges The industry is still far from enough in terms of the depth, strength, and breadth of risk control. Judging from the current market situation, due to increasingly fierce internal competition, cryptocurrency exchanges have to use most of the technology, capital, and personnel in daily operations to gain a larger market share. As a result, the investment in the field of risk control is relatively Less, insufficient risk control ability.

As mentioned above, at this stage, only the top cryptocurrency transactions such as Coinbase have sufficient resources to work on risk control. Although this investment may take a while to see the effect, as long as the user has a “sense of trust”, The long tail effect caused by this will definitely bring unexpected gains to the exchange.

With the continuous development and improvement of the cryptocurrency industry, risk control capabilities will become one of the core competitiveness of the development of cryptocurrency exchanges. Whoever can master this “critical gate” will stand out from the competition.


Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/why-is-risk-control-the-key-to-crypto-exchanges/
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