Digital currency exchanges (DCEs) or bitcoin exchanges are businesses that allow customers to trade digital currencies for other assets, such as conventional fiat money, or different digital currencies. They can be market makers that typically take the bid/ask spreads as transaction commissions for their services or simply charge fees as a matching platform.
DCEs may be brick-and-mortar businesses, exchanging traditional payment methods and digital currencies, or strictly online businesses, exchanging electronically transferred money and digital currencies. Most digital currency exchanges operate outside of Western countries, avoiding regulatory oversight and complicating prosecutions, but DCEs often handle Western fiat currencies, sometimes maintaining bank accounts in several countries to facilitate deposits in various national currencies. They may accept credit card payments, wire transfers, postal money orders, cryptocurrency or other forms of payment in exchange for digital currencies. They can send cryptocurrency to your personal cryptocurrency wallet. Many can convert digital currency balances into anonymous prepaid cards which can be used to withdraw funds from ATMs worldwide.
Some digital currencies are backed by real-world commodities such as gold.
Creators of digital currencies are often independent of the DCEs that trade the currency. In one type of system, digital currency providers, or DCPs, are businesses that keep and administer accounts for their customers, but generally do not issue digital currency to those customers directly. Customers buy or sell digital currency from DCEs, who transfer the digital currency into or out of the customer’s DCP account. Some DCEs are subsidiaries of DCP, but many are legally independent businesses. The denomination of funds kept in DCP accounts may be of a real or fictitious currency.
Comments are closed.