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If you are a crypto enthusiast, trader, or investor who wants to buy and sell cryptocurrencies, you need to trade with an authentic crypto exchange . While using just any platform for buying and selling cryptocurrencies may sound okay, you are taking a risk.
While most secure and reliable exchanges require users to carry out KYC and AML checks , many nested exchanges rely on other exchanges to function.
In this article, we share the meaning of nested exchanges and why you should avoid using them. We also discuss regulated and safe exchanges like BingX .
Nesting is a word taken from a similar occurrence in the traditional financial ecosystem. Nesting is simply a situation whereby an unregulated crypto exchange creates an account with another regulated exchange and uses this third-party service to serve their customers.
In the traditional financial ecosystem, nesting occurs when a bank creates an account with another bank to leverage its services. In other words, they use the funds from the account created with them on other bank to serve their customers.
With the existence of the crypto industry, nesting is becoming a daily occurrence as many exchanges create an account with another exchange to use their services.
It is quite simple to understand how nested crypto exchanges work. A nested exchange starts by creating one or more than two accounts with different exchanges so they can tap into their services.
With two or more accounts, they can pose as a fully-fledged crypto exchange and offer trading services to their customers. Nested crypto exchanges are also known as “instant exchanges,”. Their main distinguishing feature is that they have two or more accounts in different regulated exchanges.
To give you more insight into how nested crypto exchanges operate, they start by creating an account with another fully registered exchange. Then, through those accounts they created with registered exchanges, they buy and sell cryptocurrencies for people who think they are legit.
While some people are unaware they are using a nested crypto exchange, others intentionally use them to hide stolen funds and conduct other criminal activities.
Nested crypto exchanges don’t reveal their identity easily, as they can easily lose customers if they do so.
However, certain signs and characteristics show that a particular exchange operates using a nesting model. Noting these characteristics and using them to evaluate a crypto exchange before trading with it can help you avoid nested exchanges.
Below are some reasons you should discontinue using nested exchanges to buy and sell cryptocurrencies.
Nested exchanges are where criminals launder money stolen from the poor masses. After stealing crypto funds, hackers sometimes move them to nested exchanges for money laundering activities.
In some African countries, some government officials even use nested exchanges to hide stolen public funds. So using a nested exchange means that you are supporting money laundering activities.
Since criminals mostly create nested exchanges, your funds are unsafe if you keep them in a nested exchange.
Those managing the exchange can decide to close the exchange and take your funds with them. Since nested exchanges are usually not registered in any country, they can escape without leaving any trace.
Regulatory authorities in several African countries are always looking for nested exchanges so they can close their activities. Whenever a regulatory authority finds a nested exchange, they usually freeze all the funds contained in the exchange. You might even lose then all your funds w is busted or get into legal trouble if caught using one.
While some nested crypto exchanges are not criminal in nature, you can’t be sure and may likely be enhancing the existence of criminal activities. Nested exchanges are where most criminal activities, such as money laundering, so be careful. Use a registered exchange like BingX for your secure trading and activities.
Apart from their criminal actions, nested crypto exchanges are unreliable. You could use them this minute and lose all your funds the next minute. Since operating nested exchanges, you can even rely on them to keep your funds safe.
Signing up with a licensed global exchange is the safest way to trade crypto. Aside from having a reputation to protect, BingX ensures customer do their KYC so you can trade crypto safely.
A nested crypto exchange poses as a legit exchange but you now understand how to find them out. You also need to avoid using nested exchanges as they make it easy for criminals to launder stolen money, which may get you into legal trouble.
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