Learn the rules of cryptocurrency exchanges
As we promised, we have written a series of articles on basic issues related to trading in cryptocurrencies. Today we are discussing cryptocurrency exchanges, that is the most popular places to buy cryptographic currencies.
What is a cryptocurrency exchange?
Simply put, a cryptocurrency exchange is a type of a website where you can offer to sell or buy cryptocurrencies. Contrary to foreign exchange offices, cryptocurrency exchanges have no fixed exchange rates – you can buy or sell currencies at any price as long as you find someone who wants to enter into a transaction with you. The fastest way to monetise your assets are offers made at the current exchange rate – on many cryptocurrency exchanges, it is the real-time cryptocurrency exchange rate that functions as the default buy and sell price.
All the assets you have earned are stored on cryptocurrency exchange accounts – you can transfer them to a bank account in a traditional currency or to any wallet address in a cryptocurrency.
Are transactions on a cryptocurrency exchange subject to taxation?
Polish law is not particularly friendly for people who want to earn profits by trading in cryptocurrencies. Unlike financial services, trade in cryptocurrencies is not exempted from taxation. Therefore, you need to be prepared that you will be charged an additional VAT rate. Under the British law, sale of cryptocurrencies is classified as revenue resulting from disposal of property rights.
Are cryptocurrency exchanges safe?
Currently, most cryptocurrency exchanges use multi-factor authentication. This means that each transaction has to be authorised separately, like in traditional banks, for instance by entering a code sent by text message, clicking on a link sent by e-mail or by using the Google Authenticator app. This ensures a high, although not perfect level of security. There are still situations in which an account is taken over, with all assets kept in it, by a fraudster who hacked into the account or used cracking methods.
Can you use British pounds for payments on a cryptocurrency exchange?
Although the biggest cryptocurrency exchanges use fiat currencies (basic national currencies) such as dollars or euros, you can keep an account in zlotys on at least several of them. The largest one is Bitbay that offers trade in ten cryptocurrencies. People interested in less common coins can also try Coinroom, a new website that gives users access to 17 types of cryptocurrencies, or Bitmarket, which has a smaller offer but with DOGE and XRP.
Commissions on cryptocurrency exchanges
Each cryptocurrency exchange charges a number of comissions. Commission on a transaction is 0.30% on average, but may also be between 0 and 0.5%. What is more, we may also be charged when withdrawing the funds – most cryptocurrencies charge a commission both on withdrawal in a traditional currency and in a cryptocurrency.
It is a standard procedure that an exchange charges a different amount depending on the type of withdrawal. Some of them exempt users from fees if they withdraw funds in the preferred cryptocurrency, for instance in ethereum.