Is Your Data Safe With Crypto Exchanges? This Is The Reality

A recent Blockchain Magazine review found that crypto exchanges collect a lot of user data. Some are more transparent about their practices than others.

What are crypto exchanges? Why are they needed?

Crypto exchanges are online platforms where you can buy, sell and trade cryptocurrencies. They are needed to let people trade cryptocurrencies with each other.

Crypto exchanges serve as a middleman between the buyer and the seller, which allows them to charge a commission fee on each transaction. Crypto exchange also provides liquidity to the market by allowing traders to buy and sell cryptocurrencies without having to find someone who wants what they have.

There are many different types of crypto exchanges. Some of them allow you to buy cryptocurrencies with fiat currency, while others only allow you to exchange one cryptocurrency for another. You can also find crypto exchanges that have a marketplace for goods and services or offer margin trading on top of the basic exchange functions.

How does a crypto exchange work? What are the risks of using one?

Crypto exchanges work as a marketplace. They allow buyers and sellers to trade cryptocurrencies. This is done by matching the people who want to buy or sell with those who want to buy or sell.

The risks of using a crypto exchange are not too different from those of other financial products. These risks include:

– The risk that the exchange will not be able to pay for losses incurred by the users due to hacking, theft, or fraud;

– The risk that the user’s private key will be compromised and used without their permission;

– The risk that the user’s account will be hacked and their funds were stolen;

– The risk that they will not be able to access their account because they have forgotten their password or lost their login credentials;

Do third parties have access to my data

Some crypto services need partners to maintain their websites and process trades. They do this by sharing data with multiple partners. Although some are more forthcoming about who they share their data with, others are not.

Some companies do not specify the circumstances under which the data can be shared but others provide a vague explanation and mention some potential third parties.

Bitfinex and BitMEX shared the longest lists of third-party data partners they hold. According to Bitfinex, you can find a list of third parties at the end of their privacy policy while BitMEX had a special page with a complete list of its data providers at the top of their website.

Platforms based in Europe will usually mention, among other things, that they are transferring your data outside of the EU. They will also state how they make sure these transfers are secure. These parts of their privacy policies typically look similar across all services.

Various companies have different approaches for protecting customers in Europe, with the General Data Protection Regulation (GDPR) excluding Californians, who are not protected by the California Consumer Privacy Act.

There are some areas of the world which are more cryptocurrency-friendly than others. We’re not going into detail on these in this article, but be sure to check if your fiat service includes any important information for residents of those regions.

To make sure they know enough about their users, platforms gather information about them and their preferences from outside sources and data. While this means they may already know more about you than you told them, this is because the platform needs to understand how best to work with you.

This section may include things like companies that you work with and who also happen to be affiliated with the platform, third-party providers of identity verification and other technology, banks, government organizations, social networks.

Out of the 24 platforms in our list, Gemini sounds like the only one to take note of other sources, such as social media sites and search engines, outside of their own advertising system for information about their users.

Companies may research public records for your personal information. These may include anti-fraud databases, court documents, sanctions lists and credit bureau reports. They can also contact a range of government organisations to ask about you.

What are the reasons for sharing data with government agencies?

Major exchanges are now closely watched by regulators, and often need to provide information about their users when the authorities suspect wrongdoing. They may be asked to disclose personal data like tax returns, money laundering or even human trafficking.

“The companies that collect the information can share it with governments even if they haven’t gotten a warrant. This is why civil liberties and human rights groups like ours are teaching internet users the best way to protect their data and how to live in a society where we’re always being watched.” – Marta Belcher, cryptocurrency and civil liberty activist.

Previously, some companies kept the number of requests they received from authorities to themselves. However, more and more companies are now disclosing this information. It’s worth noting that governments are also trying to publish statistics about their enforcement actions.

The US IRS (International Revenue Service) archived 13,000 Coinbase accounts in the US in 2018. The only precedent so far has been their query for 13,000 records. They are known for their go-getter attitude when it comes to cracking down on tax evaders. There has been a long court battle between the exchange and the IRS. Originally, the IRS had wanted data on 500,000 users.

Most exchanges mentioned subpoenas, court orders, and other formal requests in their privacy policies as to why they cooperate with government agencies. However, not all companies require this for turning over data.

Blockchain.com has announced that they would not accept a government request without producing an official court order or some other legal documentation. This means that companies can turn to companies like eToro when they need help providing information to agencies. Bitfinex has a dedicated page on its website that explains how they work with law enforcement bodies.

Blockchain technology is moving so quickly that it’s hard to predict how it will interact with future regulatory bodies. It can also change depending on the shifting crypto regulation throughout the world. But the way platforms describe their approach might give some clues about the kind of outcomes they could produce.