Thailand
Malaysia: Cryptocurrency investors need to learn more about exchanges
PETALING JAYA: Cryptocurrency exchanges are hogging the news. A few weeks ago, two large exchanges operating in Malaysia saw their local accounts frozen pending an investigation by the tax authorities.
Both exchanges have said that they are unable to process deposits and withdrawals in Malaysia following a move by the Inland Revenue Board (IRB) to freeze their bank accounts.
This has put traders in cryptocurrencies using these exchanges in a tough spot.
But worse off today are some of the users of one of Japan’s largest digital currency exchanges Coincheck. The exchange has lost US$530mil worth of cryptocurrencies belonging to its users to hackers. The incident is being labelled as one of the world’s biggest cyberheist.
So what do traders of cryptocurrencies need to know about exchanges?
According to Yuwarajan K, the co-founder and CEO of Xbit Asia Sdn Bhd, there are a few key issues that investors need to know about their exchange and how to trade on them.
Firstly, investors should note that there are different type of exchanges.
“Essentially there are two types – one is a regular exchange that follows the model of traditional exchanges and the other is the peer-to-peer matching type exchange,” said Yuwarajan.
He says his own company Xbit Asia falls in the “regular” type exchange.
“We are 100% Malaysian owned and we have in place KYC (know your customer) requirements for our users,” he said.
He explained that once all the documents were verified, then only will the user account will be approved for trading.
Yuwarajan explained that typically regular exchanges like his required users to ‘fund’ their wallets, either using bitcoins or fiat currencies, in order to trade.
“Once a user enters a buy or sell order on the platform , it updates the exchange’s common ledger called the orderbook. The order then gets matched and the wallets get adjusted automatically and a fee of 0.8% is charged for any buy or sell order.”
He added that the advantage of a regular type exchange is that it offered “price discovery, finality and goodwill.”
“Price discovery allows trade to be executed in the open market with peace of mind and finality gives no conflicts between buyer and seller – trades are final once executed. Goodwill allows you to verify the exchange before you sign up and this builds a relationship of trust and faith.
He said the downside of using regular exchanges is that there are fees to be paid and sometimes there is ‘vulnerability’ of the exchange.
“The digital assets and personal information is held by the exchange and may suffer loss due to hacking incidences or being targeted by legislation.”
But how should users store their cryptocurrencies, in light of the few hacking stories?
Yuwarajan recommends users follow two important steps.
First is to withdraw all their digital assets (bitcoins or other cryptocurrencies) to their personal wallet once they have completed trades.
“Do not store your digital assets in the exchange as the wallet does not belong to you. The wallet which belongs to you will have your private key validated and that is your personal digital asset wallet.”
Secondly, Yuwarajan recommends that traders always have their “Google 2 factor authentication activated”.
Another form of exchange are peer-to-peer exchanges.
Source: https://www.thestar.com.my/business/business-news/2018/02/02/cryptocurrency-investors-need-to-learn-more-about-exchanges/#Uc5XEKWllrLhsOQ7.99