- Trading restrictions – all exchanges aren’t open to all people;
- Deposit methods – how can you deposit money to an exchange in order to start trading; and
- Supported cryptocurrencies – no exchange offers trading in all cryptocurrencies out there. Many only support trading in one or two specific cryptocurrencies, most commonly Bitcoin.
Coin Exchanges – Trading Restrictions
Let’s say that you have found the right coin exchange for you and you want to open up an account and start making that crypto fortune. Well, maybe you can’t. This is because most coin exchanges prohibit residents in or citizens from certain countries. We can categorize these prohibited people into four groups:
- People from high-risk countries;
- People from the US; and
- Foreign people (more on that below)
GROUP 1 – High-risk countries
High-risk countries are generally countries that are either subject to so called Sanctions Lists, or otherwise considered risky from an anti-money laundering perspective. A Sanctions List includes the countries that are subject to sanctions (such as trade embargoes or other financial restrictions). As a country, you generally receive sanctions when you have been naughty. These countries are the ones that the global community think are the naughtiest, and people from these countries are most often not allowed to trade at coin exchanges: North Korea, Iran, Ethiopia, Pakistan, Serbia, Sri Lanka, Syria, Trinidad and Tobago, Tunisia and Yemen.
Of course, if you are from any of the abovementioned countries and you’re trying to start an account at a decentralized exchange, where you can be anonymous, you will most likely not encounter any issues when setting up your account.
GROUP 2 – People from the US
People from the US are not excluded as the global community thinks the USA is a naughty country, but the main rationale behind excluding US-investors is the US-regulatory regmie. As you’ve surely heard, there is an authority in the US called the SEC (Securities Exchange Commission). The SEC has a lot of rules in place that can make it difficult for exchanges to on-board US-customers. There is also a tax legislation under the name of FATCA that complicates everything for organizations that have anything to do with people residing in or being a citizen of the US.
The state of New York is particularly difficult from a regulatory perspective, so there are a number of exchanges that do allow US-investors but only as long as you’re not from New York.
The most extensive coin exchange list in the world also notes when US-investors are not permitted. Out of roughly 300 coin exchanges, 81 do not allow US-investors. This means that more than 1 out of 4 exchanges excludes US-investors. So, if you’re from the US and you need to know what options you have among coin exchanges, have a look at Cryptowisser.com for an amazing overview.
The following are the top 4 coin exchanges that permit US-investors in the Coin Exchange List:
GROUP 3 – “Foreign people”
The second to last category of restricted people is what we have labelled “foreign people”. I’m imagining you might wonder what this is all about. But what we mean by this is when cryptocurrency exchanges from a certain country only allows citizens of that country to trade there, and thus excludes foreign investors. This is not very common, but still common enough to qualify as a major trading restriction. Typically, we have found that this approach is more common among cryptocurrency exchanges from the Oceanic countries (Australia and New Zealand in particular), India, and Turkey.
GROUP 4 – PEPs
Finally, you might encounter a fair share of difficulties if you are a “PEP”. The same problems apply if you are a relative or close associate of a PEP. PEP is an acronym for “politically exposed person”. Politically exposed persons are normally top politicians, Supreme Court judges or people having other prominent public functions. So, if you’re the kid of a supreme court judge for instance, you’re a relative of a PEP.
When an exchange is dealing with a PEP, they must take a lot more customer identification actions than dealing with a non-PEP. Many exchanges don’t want to deal with these nitty-gritty things and simply just disallow PEPs from on-boarding as customers.
Anyhow, if you want to open up an account at an exchange and you don’t belong to a “prohibited group”, we need assess the next step: deposit methods.
Deposit Methods at Various Coin Exchanges
With respect to deposit methods, there are two main groups of exchanges to think about: entry-level exchanges and non-entry-level exchanges. We call entry-level exchanges just that because they allow entry into the cryptocurrency market for new cryptocurrency investors (i.e. people with no previous holdings of cryptocurrency). Entry into the cryptocurrency market is allowed by making it possible to deposit fiat currency (regular cash) into the relevant exchange.
The following exchanges are the top 4 entry-level coin exchanges (based on user rating) in the Coin Exchange List:
The other group of coin exchanges – the non-entry level – only permits deposits of cryptocurrencies. No fiat currency deposits are allowed. These coin exchanges are then off boundaries for new cryptocurrency investors.
On the opposite side of the spectra we have the pure-fiat-to-crypto coin exchanges that we spoke about last time. These only allow fiat currency deposits, and you can’t deposit any of your previous holdings of cryptocurrencies here.
Roughly 2 out of 3 coin exchanges have entry-level opportunities, and the remaining 1 out of 3 only permits cryptocurrency deposits.
Credit Card Deposits
Out of the coin exchanges that do allow cryptocurrency deposits, most allow wire transfer. You can make a wire transfer in a lot of different ways. It can made through a simple “your bank account to the exchange’s bank account”-transfer. It can also be made through an intermediary third party payment service provider. There is also a much smaller group that allows deposits of fiat currency through credit card or debit card payments. This group is much smaller, around 1 out of 6 exchanges, but they do exist. So if you’re interested in racking up airline reward points through your credit card or for any other reason prefer to use your credit card, you can. The following coin exchanges are the top 5 (based on user score) in the Coin Exchange List that allow credit card deposits:
However, warning, if you choose to deposit via credit card, please be aware that some coin exchanges charge really nasty deposit fees. Fees can be up to 12%, meaning that when you deposit USD 100 at an exchange via credit card, you only get USD 88 to trade for. 12% is an extreme fee and not a market average, but you get our drift, be cautious.
To find out which exchanges that have which deposit methods, check out the Coin Exchange List where you can review all of the major exchanges in their world and their respective deposit methods.
Most exchanges do support Bitcoin, and it would be idiotic not to as trading in Bitcoin stands for more than 50% of all the cryptocurrency trading in the world, but it is not as clear which other cryptocurrencies to support. It is mostly a result of which cryptocurrencies that cryptocurrency investors like you and me would like the exchange to offer trading in. It’s like a clothing store. If all the customers want a certain sweater, it makes sense for the store to include it in its collection. If only 1 out of 10,000 customers want that same sweater? Well, then it will be unnecessary for the store to include it in its collection. The same rule really applies for cryptocurrencies.
So, if you’re looking for Bitcoin and Ethereum, it is very likely that these are supported by any exchange that you’re contemplating to start trading at. However, if you’re looking for a smaller token, it is very uncertain that you will find it at the relevant coin exchange.
Luckily for you, the company Cryptowisser has created a tool called the Exchange Finder. In the Exchange Finder, you just input what cryptocurrencies you’re interested in and the tool will then match you with the exchanges that supports trading in that cryptocurrency. Just WOW. So easy! The exchange finder also includes functionality for limiting the results to coin exchanges that offer credit card deposits and/or exchanges that are open to US-investors, should you so wish. Go check it out!