Why Over-the-Counter Crypto Exchanges are Thriving in Banned Jurisdictions. There is a long story behind formation of over-the-counter exchanges to facilitate the traders who are facing restrictions from their government regulatory authorities and financial institutions. We can simply say that it is the way to bypass such bans imposed on the trade and transaction of digital currencies. The reason behind the formation of these exchanges is obvious to those who have been trading crypto or who have been connected through news and updates about this industry.
What is the Need of Over-the-Counter Crypto Exchanges?
The story is not even a decade old. After the emergence of virtual currencies to the surface, many culprits started looking at it as a mean of transferring money secretly. Criminals, money launderers, sex-traffickers and other people running illegal businesses started using bitcoins and other digital coins to secretly make transactions. By doing so, they were out of sight of all the regulatory authorities and thus governments starting banning the exchanges to stop the illegal activities.
Consequences of Banning Crypto Exchanges
The underpinning technology behind all of the digital currencies is Blockchain. Blockchain unquestionably provides the most efficient, transparent, safer and immutable solutions to every business model that implements this technology.
Why Over-the-Counter Crypto Exchanges are Thriving in Banned Jurisdictions
Seeing the trend, hundreds of corporations transformed their models to blockchain. To get financial gains, most of them introduced their own tokens which they offered at discounted prices. These are called Initial Coin Offerings (ICOs), in which they would generate some revenue to be invested in transformation of their business.
This trend is widely adopted today and we could see thousands of crypto currencies being circulated in the exchanges.
Profit of Investing in ICOs
Every digital coin was sold at a introductory price at the ICO level and would potentially gain much value after couple of months before it was open to public sale and open to be traded in the exchanges. This was a easy profit for the traders and they started looking to invest at the ICO stage of the projects.
When Government Banned those Crypto Exchanges
The problem started when governments started banning crypto trading and their financial institutions restricting the banks from transacting them. The traders of particular countries were worried on these bans because thre was absolutely no way out to these restrictions. China is one of the countries which initially pioneered the boom of bitcoin but now it is facing the harshest ban on trading them.
Over-the-Counter Crypto Exchanges
Well, let’s only talk about Chinese traders to make the point understand in an easy manner. Chinese traders started moving to hongkong and other countries where regulations were more friendly. But that was not a permanent solution because small traders did not find it feasible to relocate or to establish a business in other countries.
Over the counter exchanges were created to facilitate the traders. In these exchanges traders are free to trade “off exchange”. By doing so they managed to remain out of sight from their governments. It is more like an escrow trading where traders can buy and sell their coins against fiat currencies, commodities or in exchange with other crypto currencies.
Local Bitcoin Exchange
Local bitcoin is one of such over the counter exchanges which can be used worldwide. They offer the traders to trade in a face-to-face meeting and other convenient options. They keep their commission against the trades and offer a secure way of trading to two parties. Sellers simply put their coins on sale and then wait for the buyers. Funds are kept in an escrow account and are transferred on successful completion of the trade.