How do exchanges handle fiat currencies?

Theses answers are going to depend on a couple of factors:

1) The particular exchange you are working with.

Each exchange is going to have its own set of policies and different levels of transparency communicating these policies to customers. Look for exchanges with more transparency/details.

2) The country the exchange assigns to you when you open the account.

Exchanges are facing financial regulations imposed by governments. Global exchanges can have different guarantees in different countries. For example, Coinbase and GDAX state, "If you are a United States resident, your Coinbase USD Wallet is covered by FDIC insurance, up to a maximum of $250,000." Source: How is Coinbase insured? This link Supported Countries shows the supported countries for GDAX and the supported fiat payment methods. I made this video discussing insurance policies at Coinbase and GDAX. It may help: GDAX and Coinbase - Insuring your crypto is safe

3) If the exchange is centralized or decentralized.

If you are working with a decentralized exchange, you are in control of your funds. The Waves platform is an example of this: https://wavesplatform.com/

Summary:

In general, it's not just the fiat that you have to worry about at centralized exchanges. If the government for example seized the assets of the company, they would also be able to control your crypto. If you are super worried about this, you can send your cryptos to a private wallet that you control. The downside to the private wallet is that you are totally responsible for security, backups, etc. There is no help if mistakes are made.

Most exchanges allow you to send crypto to them after you have opened your account. The crypto can then be used for trading. Additionally, many exchanges allow you to purchase using a credit card.

See this for details on exchange vetting: How do I know which exchanges are serious actors?
I made this playlist that goes through policies of Coinbase and GDAX. It may help: GDAX Playlist

deeplizard

Posted 2017-09-21T10:42:06.510

Reputation: 411

I read that coinbase isn't actually an exchange, but more like a broker for multiple exchanges? – jiggunjer – 2017-09-22T01:28:42.323

@jiggunjer That is partly correct. The Coinbase brand is marketed towards regular consumers. The company has an exchange called GDAX. They market the exchange solution to traders. They say institutional/professional investors, but it's really just like a brokerage account. Think Interactive Brokers, Scottrade, TD Ameritrade, etc. – deeplizard – 2017-09-22T01:50:05.640

@jiggunjer Coinbase says "United States resident." That is referring the the USD protection. To use the exchange, check the supported countries: GDAX and Coinbase around the globle - Which countries are supported? Source

– deeplizard – 2017-09-22T03:04:09.833

That is possible. However, you will have to provide banking information. This differs by country. If you use a credit card, that would probably work. However, when using credit cards, they lower the limits that you can deposit per week. The company doesn't want a barrier. They are restricted by government regulations. All of the id collection, country restriction, etc, is a result of complying with those regulations. Governments generally like to track flows of money. – deeplizard – 2017-09-22T03:29:30.640

Let us continue this discussion in chat.

– deeplizard – 2017-09-22T03:50:17.990

You will still have to prove your identity before you can fund your account. This will place you as a citizen of some country. Then, once you are ready to fund, if you choose bank account. You will have to use the banking system of your country. ACH transfers in US and SEPA in Europe. – deeplizard – 2017-09-22T04:08:23.197

How do exchanges handle fiat currencies?

Answers