Although the question from the title might be a little confusing, in reality, it aggregates two of the most common dilemmas people have when looking after a reliable trading brand to work with. This article will focus mostly on Bitcoin and crypto trading scams, considering this is a growing industry and the enthusiasm generated makes people forget about taking care that their broker is a reliable partner.
The importance of regulation for crypto brokers
We would like to reemphasize that regulation for a crypto broker is as important as for any usual CFD or Forex provider. The broad cryptocurrency market is not yet fully regulated, and most traditional exchange platforms operate via an offshore entity, ensuring a low degree of transparency.
As a result, when traditional brokerage houses started to integrate crypto-based instruments, the valuations were still coming from liquidity providers (a.k.a. traditional exchanges), leaving them open for manipulation (pump-and-dump, spoofing, wash trading, etc.).
However, working with a regulated broker that has support for several cryptocurrency assets will help you not fall into a potential crypto trading scam. Being regulated by a well-known entity is one of the proofs the broker is committed to high trading standards and combined with a clean reputation, it only reinforces the fact that the entity will work on your behalf.
A Bitcoin scam, on the other hand, will display similar hints like any other trading scam. It will promise exaggerated profits (no one can guarantee a certain level of profitability in the trading world), demand a high initial deposit, and advertise “premium trading conditions” when in fact there’s nothing out of the general conditions.
Regulated broker = trusted brand?
Does it mean that a regulated brand is necessarily a trusted brand, though? A regulated or multi-regulated broker has little chances of being a Bitcoin scam. Becoming an authorized and licensed financial services provider requires a lot of paperwork and at the same time, it comes with supervising after the license had been granted. These brokers are constantly monitored by financial regulators and with that in mind, their interest is to follow good work ethic principles.
However, regulation is not the only requirement for an honest and trusted brand. Such a reputation is built over the years based on transparent feedback from already-existing customers. It is possible to have a broker that is regulated, yet its services are below the market average. Trading costs are elevated, the customer support is poor, and the overall trading features are modest, as compared to other brands.
That may not be a crypto trading scam, but you should still consider avoiding it because you can find more benefits in other places. Still, keep in mind that regulation is an important requirement when choosing a trading partner, but not the only one you should look at.
Unregulated broker = scam?
When finding a broker that is not regulated by any financial agency, the risk of falling victim to a Bitcoin scam increases. A regulated broker shows commitment to comply with the law, sometimes the strictest requirements in the world, and thus prove high trading standards. An unregulated broker wants to cut corners and operates under the radar, having the ability to create an environment in which customers can be taken advantage of.
Unregulated brokers have weird terms and conditions, setting up rules that at any point can block a trading account and seize all the funds in it. Unfortunately, people should have been aware of this, because all the details are already mentioned on the broker’s official website. We don’t think that a broker not paying attention to regulatory compliance should be your trading partner, even though it had not yet been flagged as a scam.
Reputation and customer feedback matter in the end
Although regulation is one of the key parts, it is important to note that the overall broker reputation and transparent customer feedback are the foundation for building honesty and reliability. Brokers that qualify, had been in the industry for years and in doing that, had passed the ”test of time”. A Bitcoin scam is generally a website that has been launched recently, has little background in the world of trading, and little or poor customer feedback.
Although an unregulated broker is not necessarily 100% a crypto trading scam, it would be appropriate to not let the regulation aside. Keep it in mind and on top of that, look at other particularities that might give more insights into the level of the broker’s professionalism.
Trading crypto with the right broker
If you want to trade cryptocurrencies, yet avoid getting involved in a crypto trading scam, it is important to work with a broker that has support for some of the popular tokens. There are numerous reports that most of the altcoins are not reliable and because of that, the brokers focusing on large-cap tokens are the most trusted brands.
Also, regulation, trading costs, features, and tools, as well as the already-established reputation, will need to be part of your decision-making process when choosing the right crypto broker. Such a company would be appropriate when considering different aspects, not just the regulatory side. Fortunately, there are plenty of companies meeting all these requirements, but at the same time, it is important to note that increased crypto interest led to the appearance of many new crypto brokers that don’t have an established reputation, yet.
The bottom line is that a regulated broker can still provide inconveniences if it offers access to a trading environment that’s not consistent with the latest market demands. However, regulation keeps a broker in line with the latest laws and makes sure that the client’s interests will be on top of the list. Lastly, even if an unregulated broker is not yet flagged as a scam, it should be treated with caution and your job will be to find enough evidence that it is a trusted brand, working so you will benefit from optimal trading conditions.