While regulating the bitcoin exchange industry is an important step, there are several drawbacks to using an unregulated service. For starters, an unregulated service is more risky than a centralized one. In some cases, it may freeze your account. Also, regulated exchanges may have more stringent financial regulations. If you are unsure whether your service meets the regulatory requirements, contact your local regulator and ask for guidance.

While regulating a bitcoin exchange may not be feasible, some exchanges are already undergoing the process. Coinbase, for example, is a regulated business in the United States. Other unregulated exchanges aren’t. BitMex, which is headquartered in Mexico, has been operating an unregulated derivatives exchange for American residents since 2014. The U.S. Commodity Futures Trading Commission, which oversees financial exchanges, has filed a lawsuit against the exchange for allowing American residents to trade crypto futures. The company has settled the charges and agreed to pay a $100 million civil monetary penalty.

There is no regulating body for Bitcoin and many unregulated exchanges aren’t supervised by the SEC. However, the SEC recently issued guidelines for regulated and unregulated exchanges. Those who are concerned about the regulatory environment can try using these exchanges. They may provide a level of assurance to investors who are unfamiliar with the crypto market. Moreover, the best-rated exchanges will become a benchmark for the industry.

Furthermore, unregulated exchanges may suffer from the reputation of a pump and dump scheme. Although these schemes don’t harm the reputation of an unregulated exchange, they can lose clients as a result of increased user activity. Nevertheless, if an unregulated exchange is willing to provide information, it could help foreign authorities, while regulated exchanges have strict KYC and AML standards. This means that an unregulated bitcoin exchange won’t be forced to cover the losses of others.

Aside from these concerns, unregulated bitcoin exchanges should also be inspected. The SEC is not interested in regulating unregulated exchanges. Its regulations would make them less risky. The SEC should be able to monitor any suspicious activity that might occur. Besides that, there are a number of reasons why unregulated bitcoin exchanges should be inspected. A good regulation will prevent such incidents from occurring in the first place.

In addition to regulating the bitcoin exchange, unregulated exchanges should also offer other services to help retail traders. These services should be licensed by the SEC to avoid fraudulent activity. Currently, there are seven regulated exchanges in the United States, including Coinbase. But the SEC does not regulate them. While it may be illegal to engage in a cryptocurrency transaction, a regulated bitcoin exchange is a legitimate business.