Blockchain is one of the most transparent technologies ever created, and cryptocurrencies one of the most transparent applications of that technology. Cryptocurrency exchanges, however, are as closed as the private banks, which we desperately want to move away from, due to their opaque nature.

We believe that this needs to change to ensure the survival of cryptocurrencies, either as a currency or as a store of value.

What we would like to do, is highlight some of the current problems plaguing the cryptocurrency exchange sector and how we, at EUCX, are taking a different approach to these issues.

As an example let us take the listing of a new coin or token on any random exchange. The listing process is almost never open and transparent. Exchanges never seem to specify what the process and costs will be for a listing. We simply do not understand that. Why must a listing procedure be such a secret? Is the competition going to steal the listing procedure, or are the fees so high that exchanges simply know that they’re going to get flak for it?

This is difficult for the blockchain teams as well. In many cases the team applying for a listing on an exchange has no idea when — or rather if — their coin or token will be listed, and the team often has little influence on the listing date. Would it not be better to be able to know the details for a listing before a team sets the listing procedure in motion? Would it not be better to know exactly what the fundamental or functional requirements would be, how much it would cost and what the waiting period would be for the (accepted) token listing? Knowing these will increase the likelihood of a successful listing and would keep blockchain teams from having to needlessly jump through hoops like a bunch of poorly treated circus animals. Which brings us to ethics.

In many countries it is a legal requirement to publish an annual report. So, companies post their annual report either through the chamber of commerce (like it is required in the Netherlands) or on their website. But where are the annual reports from cryptocurrency exchanges? Where is the ethical requirement to publish an annual report? Why the secrecy? Sure, it does not have to be a legal requirement, but what about an ethical one? Where is the harm in publishing an annual report, clearly and openly on the exchange’s website, allowing everyone to see and even review what the exchange has been up to in the past fiscal year, and more importantly, look at where the exchange wants to move towards in the coming year.

And what about regulatory requirements? Cryptocurrency as an industry has been getting more than enough attention that lawmakers have started making (draft) legal frameworks for cryptocurrencies to be traded in. Some legislators have even categorized cryptocurrencies under the existing financial laws.

Some exchanges have taken a certain road in order to avoid regulation. They suddenly leave a country or region and move across the world to a different continent. In our opinion, and it might not be the most popular one, we believe that government regulation will help the cryptocurrencies market. By creating a legal framework for cryptocurrencies to operate in, cryptocurrencies not only get alleviated to the level of “serious financial product”, but it will also provide a great deal of protection to the owners of cryptocurrencies when dealing with centralized entities, such as exchanges. We believe this is one of the necessities for large scale adoption, growth and maturing of the cryptocurrency industry.

Who are behind the exchanges? Who is the ultimate beneficial owner? Who are the (major) shareholders? Where is the exchange located? And why is it so hard to get an answer to these basic questions? The absence of this basic information increases the chances for exchanges to fake a heist, or simply close up shop and run off with the users’ funds. Which is one of the reasons why we at EUCX are pushing for a proper regulatory framework, either on a national or European level.

The legal definition of cryptocurrencies in the law books form the keystone to legal protection for cryptocurrency owners or traders. But, the most important aspect of a legal framework for cryptocurrencies is that it can act as the catalyst for cryptocurrencies to be taken seriously by the general populace. While we truly believe in the decentralized nature of cryptocurrencies, and from an ethical point of view we would rather see it grow beyond the 2017 peak without the need of regulatory measures, we also understand that this is simply an unrealistic utopia. The fact is, there are scammers and criminals about in all shapes and sizes, and measures must be taken to mitigate this problem. Such as proper information security measures.

Now hold on. We get it — no company likes to share their security measures. For example the procedure on how to keep the exchange’s cold storage wallet secure. Some things simply can not — and should not — be shared with the general public. But there are other ways of showing the public that a company takes its security seriously. One way is to obtain and publish an ISO 27001 certificate, or if that is not directly available, publish the (redacted) auditing results. And while an ISO certificate is not to be considered to be the holy grail of information security, having a certification shows that the company is at least aware of security, taking it seriously and has implemented a baseline to operate and grow from.

Promises made, promises kept? Exchanges often promise the world and then cannot keep their promises. Unfortunately, this is the case for many blockchain-related projects at this point in time. The promise suddenly disappears from the site and it is even blatantly denied when asked about it.

Unfortunately we have seen this behavior before. We like to draw a parallel with the dotcom bubble during the early 2000s:

After a small decade, the web went mainstream. The general populace, corporations and governments finally started to see the power and potential of the web. As a result, everyone and his grandma started to create a dotcom-related project or company. Many of which did not really warrant the use of the web specifically and many of those projects or companies are no longer amongst us today.

The same can be said for blockchain-related projects during 2017:

After a small decade, blockchain went mainstream. The general populace, corporations and governments finally started to see the power and potential of blockchain. As a result, everyone and his grandma started to create a blockchain-related project or company. Many of which did not really warrant the use of blockchain specifically and many of those projects or companies are no longer amongst us today.

Just like you, we are not happy with the current state of crypto, but instead of just complaining about it we decided to do something about it. We are the European Cryptocurrency Exchange (EUCX) and we are as open and transparent as legally possible. We believe that limited regulation can help drive crypto acceptance and mainstream adoption. In contrast to many others, we have a clearly defined process for coin listings, and we publish our annual reports on our website as they become available. We do not hide who we are and are currently working with regulators and partners (European Blockchain Foundation in this case) to facilitate the implementation of the new regulations as of 2020. Instead of fighting against the inevitable, we provide input and try to help the process of creating a fair regulatory framework.

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