The Banking Executive Magazine - November 2022 Issue

• Educational tools: A big priority for crypto beginners when it comes to choosing an exchange is the op- portunity to learn more about dif- ferent coins, digital assets, and blockchain technology. Coinbase exchange, for example, offers re- wards for learning about new coins through its Coinbase Earn program. In exchange for watching videos and completing quizzes related to different coins, Coinbase rewards users with a small portion of the crypto, which they can then hold or convert to something else. Oth- ers offer courses and articles on site to help learning about crypto mar- kets, history, and innovations, such as Gemini’s Cryptopedia or Bi- nance Academy from Binance. • Storage: An exchange that allows users to keep their crypto within their online account can be a good choice, especially for beginners. At a later stage, users can keep their crypto in their own wallet. • Tax information: Crypto trades should be reported as capital gains on tax return. • Additional considerations: There are additional factors to be consid- ered based on user preferences, like customer support, mobile app, and how easy the exchange is to use overall, the fee structures and the security measures. TYPES OF CRYPTO EXCHANGES According to Nasdaq, there are cur- rently three types of exchanges as de- tailed below: 1) Centralized Cryptocurrency Exchanges (CEX) Centralized cryptocurrency ex- changes are similar to traditional stock exchanges. The buyers and sellers come together and the exchange plays the role of a mid- dle-man. In the crypto-world, “centralized” means to trust some- body else to handle your money. One of the main issues with cen- tralized cryptocurrency exchanges is their vulnerability to hacks. 2) Decentralized Cryptocurrency Exchanges (DEX) A Decentralized cryptocurrency exchanges (DEX) does not rely on a middle-man to hold users’ funds. It is a marketplace where buyers and seller come together and process the transactions directly between one another. DEXs facil- itate peer-to-peer trades. Decen- tralized cryptocurrency exchanges are harder to hack. However, users are more vulnerable to lock- ing themselves out of their money. Other problems with DEXs may include low volumes and low liq- uidity due to lack of popularity at the moment. 3) Hybrid Cryptocurrency Exchanges Hybrid cryptocurrency ex- changes, are known to be the next generation crypto trading market- place. They aim to merge the ben- efits from both centralized and decentralized exchanges. More specifically, hybrids seek to pro- vide the functionality and liquidity of a CEX with the privacy and se- curity of a DEX. Many believe that such exchanges are the future of cryptocurrency trading. CRYPTO EXCHANGES FEES There are various types of fees for buying and selling coins in a crypto exchange: • Trading Fees: Trading fees may be charged as a flat percentage of the amount of crypto you buy or sell, or an exchange may differentiate the BANKING EXECUTIVE 10 ISSUE 167 NOVEMBER 2022