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I feel like this is the ultimate fate of every exchange that holds coins.

• JumpCrisscross 9y ago
  > this is the ultimate fate of every exchange that holds coins I do too. There is a reason modern markets feature segregation between exchanges, clearing/settlement, and customer-facing (and funds-handling) brokers.
  • totalZero 9y ago
    There are indeed some definite advantages to the structure of modern markets, as you say. Securities markets, even structured as they are, would totally eat their customers if they were unregulated. It's fear of the SEC and FINRA ending their careers that keeps most of them in line. You could add three more participants to the crypto trading process and it would still be a minefield, because any one of those participants may misbehave absent regulations. Modern markets involve a brokerage that acts as a custodian of your account holdings, separate from the exchange itself. However, that alone doesn't prevent churning, violation of account terms, opening of unauthorized accounts, recommendation of excessively risky trades, misuse of capital that leaves little liquidity to ballast the whole firm, etc. Keep in mind that it's the FDIC that insures your personal bank deposits, and that there are regulatorily approved clearinghouses to remove counterparty risk from many derivatives markets. These things wouldn't exist without regulators.
    • themagician 9y ago
      I'm not sure any amount of regulation would really solve the problem. At the end of the day someone is going to be able to see the private keys. And that's all they have to do—see it. Anyone with access to a private key can steal it at any time. It's almost the same as being able to rob a bank just by being able to look in the vault. You just need a peak, and escaping with the pot is as easy as pretty a button.