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5 Reasons Why You Should Avoid Nested Crypto Exchanges

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 .

What Is Nesting?

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. 

How Do Nested Crypto Exchanges Work?

Source: Grapherex on Medium

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. 

Features of a Nested Exchange 

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. 

  • The first sign is that the exchange makes it extremely easy for users to sign up on their platform. Sometimes they will require that you use your Google account to sign up without any KYC or AML checks
  • The second sign is that they often do not have any license to operate in any country. Since they must submit certain documents and undergo several checks, they often prefer to be anonymous. BingX is a legitimate crypto exchange with licenses to operate in the United States , Canada, Europe and Australia with presence in over 100 other countries.
  • Nested exchanges also don’t have an actual rate when you open their app or website. Since they have different accounts with a registered exchange, they often have different trade rates. 
  • If you are using a nested exchange and try to monitor the funds coming from the exchange, you will see that it is coming from another exchange. You can try this using a blockchain explorer. 

Reasons You Should Avoid Nested Crypto Exchanges

Below are some reasons you should discontinue using nested exchanges to buy and sell cryptocurrencies.

Money Laundering Activities

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. 

Source: Ledger Insights

Insecure Funds 

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 Might Close the Exchange

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. 

Criminal Risk & Activities

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.

Source: Chainalysis


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. 

Stay Safe and Trade Crypto With BingX Exchange

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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Disclaimer:   BingX does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their own research before taking any actions related to the company. BingX is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the article