What problems do digital currency and digital asset traders face?

Digital Currency Individual Traders miss lucrative trading opportunities because they lack tools, time and in many cases skill. And, it’s only going to get worse as barriers to control, choices and effective portfolio management practices increase each day with the launch of new digital exchanges and digital token classes.


When it comes to trading the markets, whether it be in digital securities or currencies, the necessity for a seamless banking experience is paramount to taking full advantage of trading opportunities. Dealing with the banks is not the most exciting experience, but finding a good one to look after your money is as important as the trades that are being made. When using a digital exchange to trade, traders must consider the processes involved with both depositing and withdrawal of funds including in most cases foreign currency exchange rates.

Generally, with each exchange traders are limited on the amounts they can deposit until they pass a KYC/AML check. There is also the fact that if they reside in a country that an exchange doesn’t support, they will be required to open a bank account in the currencies accepted by that exchange. This process can be very cumbersome and can lead to being charged extravagant fees. The other major issue is settlement time. Every jurisdiction around the globe has its own banking and settlement networks. With some better than others, it is important to understand that you can be waiting from anywhere up to 10+ days to receive funds.

The ability to transact with fiat vs digital currency are polar opposites. With fiat requiring an intermediary like a bank to initiate and process a transaction whereas, with digital currencies, transactions are instantaneous and do not require an intermediary to facilitate a transaction. The freedom of borderless payments and 24/7 instant settlement just simply does not exist with the current fiat system of currency transfer.

Photo by Kolar.io on Unsplash


Each exchange is different. When traders are looking for investment opportunities, sometimes it can be difficult to find them at the right times. When they do find them, it can be even harder to jump into the opportunity quickly enough and take advantage without needing to learn a whole new platform or software just to participate in the market.

Although technology is evolving, traders almost need a degree in computer science to use the services available as many of these platforms are designed for professional traders with complex features.

The other crucial factor is that when determining which trade to make, regarding any digital currency or asset, traders will need to have a professional investment insight and analysis done. Without one, they are essentially making blind “bets” on what tokens and assets are going to grow in value as they do not have the full background story on what they are investing in.

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Every successful trader has some methodology that they use to manage their portfolio allocations effectively.

In the past, Excel spreadsheets were used to track and monitor these assets and some traders still are using them. Nowadays, spreadsheets are being replaced with portfolio management software applications.

The problem is, these applications only monitor portfolios and are limited to the functionality and connectivity that they have. The fact that you still need separate software in addition to using multiple exchanges can be overwhelming and lead to time and capital lost especially if they are not tech-savvy individuals.


Each jurisdiction around the world has different laws and regulations that must be upheld to protect traders from scams and other malicious criminal activities. Therefore, when it comes to trading in the cryptocurrency and digital asset markets, the laws that apply to how and what they are buying are important to learn.

The most critical factor to understand is whether traders are buying a digital currency (utility token) or a digital security (security token).

The regulation of these asset classes have been in the spotlight lately and the regulators, such as the United States Securities Exchange Commission (SEC), Monetary Authority of Singapore (MAS) and Australian Securities & Investments Commission (ASIC) are cracking down on illegal ICO projects that are deemed securities offerings and are not registered. This has led to large fines being imposed and possible jail time for the operators.


Securities and Exchange Commission Chairman Jay Clayton 2018

“I want to go back to separating ICOs and cryptocurrencies.ICOs that are securities offerings, we should regulate them like we regulate securities offerings. End of story.”


One of the major pitfalls and risks that any trader or exchange must deal with is security and custodianship of digital assets.

When it comes to securing digital assets, there must be a combination of technology and strategic planning policies and procedures in place, that must be adhered to, in order to achieve a secure and robust ecosystem.

With the advent of major hacks and privacy breaches including news articles about exchanges that have lost millions of dollars of their client’s digital assets and personal information, it is important to know how to protect digital assets and personal data from being accessed by bad actors.

Most exchanges currently use specialist third-party service providers to protect their networks from intrusion and still these bad actors are able to target and breach these systems. It truly is a global issue and as the internet gains momentum and extends its global reach, there exists a burgeoning requirement from regulators and governments for these service providers to enhance and deliver services that are both scalable but are also secure.

The days of pin numbers and SMS 2-factor authentication are quickly coming under scrutiny and are rendering security protocols redundant. In order to mitigate these risks, there must be additional layers of security parameters put in place in order to protect the future global digital economy from being held hostage and ultimately lead to a collapse.

Blockchain technology will play a pivotal role in how this problem will be addressed and has stimulated innovation in the economy. As more of the assets of the world are becoming tokenized and traded on secondary markets, the way service providers handle these transactions will either make or break the ecosystem.

Photo by Kolar.io on Unsplash


A critical issue surrounding cryptocurrency and digital asset transactions is the capture and processing of identification documentation and proof of income and assets for Know-Your-Customer (KYC) verification purposes that are required to be carried out in a legally compliant manner.

The determination of whether a digital asset is restricted for accredited vs non-accredited investors will also decide what types of documentation will be required to be captured to stay compliant with the laws and regulations of the various jurisdictions. Companies that do not follow the rules and laws governing this procedure are open to being prosecuted and shut down.

A valid Anti-Money Laundering (AML) program is also required to be in place in order to ensure that sanctioned countries, black-listed individuals, companies and terrorists are not able to participate in the financial services business and trade capital markets using funds from proceeds of criminal activity.

Cryptocurrency, in particular, has been notorious for being known as a way to pay for goods and services on the dark web and other nefarious marketplaces for the benefits that transactions can’t be traced. While this is true to some degree, the proceeds of these transactions are illegal and are not allowed to be used to participate in legitimate markets and businesses hence the requirement for KYC and AML compliance regimes.


All the issues and problems outlined above collectively create extreme barriers to entry for amateur traders and hinder scalability for those more experienced individuals.

In conclusion, we must address the following issues:

• Banking — Long settlement times, fiat bank accounts and foreign exchange rates;

• Investing & Trading — Digital currency and asset insights, analysis and the technical ability to trade;

• Portfolio Management — Requires multiple software and excessive administrative paperwork to manage portfolio allocations effectively;

• Regulation — Not knowing the difference between a utility and a security so as to avoid prosecution from regulators;

• KYC/AML Compliance — Not having a KYC/AML policy and program in place can lead to being prosecuted by authorities;

• Security & Custodianship — Not having a security policy framework in place including offline hardware to mitigate against lost capital;

For these problems to be addressed, first, there must be an investment in research and development so that companies and governments are able to bring the technology and legislation required to the market. These problems will continue to exist unless they are addressed through co-operation from all parties involved in the proliferation of blockchain technology.

This article was written to help traders understand the problems that exist in the digital currency and digital asset markets so they can make more educated and informed decisions on the possible solutions that exist.

This article is sponsored by KOMPOUND — A digital currency and digital asset portfolio management trading platform.

For more information please visit: www.kompound.app


What problems do digital currency and digital asset traders face? was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.