What is a Cryptocurrency Exchange? for Beginners

Cryptocurrency exchanges have become vital to the modern-day blockchain ecosystem. There are hundreds of businesses in this space, with some operating locally and others serving customers from all across the globe. Picking a crypto exchange is often the first thing investors must do before they can buy digital currencies like Bitcoin. Understanding what a crypto exchange is and why they’re important can help make this process much simpler.

What is a crypto exchange?

A cryptocurrency exchange is a platform that allows you to buy and sell Bitcoin, along with other cryptocurrencies, easily. Most well-known and popular crypto exchanges are called “centralised exchanges”, as they rely on a central authority to settle the trade of cryptocurrencies between two customers. 

Crypto exchanges typically use a central limit order book (CLOB), which pairs buyers with sellers. Let’s say someone puts in an order to buy Bitcoin at AUD $60k. The exchange will pair the buyer with someone who has filled an order to sell BTC at that price and finalise the trade.

Most Australian crypto exchanges require customers to verify their identity and only then deposit AUD through a bank account. However, some international exchanges only accept USD, while others must be funded with cryptocurrencies.

For the most part, crypto exchanges come with an in-built storage solution. That way, newcomers can easily hold their digital assets on the exchange they buy from – although this isn’t recommended for the long term. Some exchanges boast upwards of 300 cryptocurrencies for users to trade, including Bitcoin, Ethereum, Dogecoin, Litecoin and more.

Picking the best crypto exchange in Australia for the first time can be a little intimidating. For first-timers, finding a local exchange with good customer support, security history (ISO27001 certification, for example) and low fees is a great starting point.

Are crypto exchanges legal in Australia?

The cryptocurrency industry sits in a regulatory grey area. This can lead some to believe buying and selling digital currencies through an exchange isn’t technically legal. However, this couldn’t be further from the truth – crypto exchanges, as well as trading and spending cryptocurrencies, are legal in Australia.

However, national cryptocurrency exchanges must abide by several strict regulations to offer Australians the ability to purchase digital assets with AUD. Each company must be registered with AUSTRAC and verify each customer’s identity before providing AUD-based crypto services. These fall under the umbrella of Australian Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations.

How to sign up to a crypto exchange?

Signing up to a crypto exchange is usually quite simple. Most platforms have a very similar process. For the purpose of this guide, we will demonstrate how to sign up for the popular Australian crypto exchange, Swyftx.

1. Navigate to the Swyftx home page. First, head to the exchange’s homepage. Most platforms will have multiple ways to sign up – click the “Create an account” or “Signup” button to get started.
2. Enter details. Now, continue with creating an account by entering your country of residence, name, mobile number and email. Ensure you have your phone and email handy, as you will need to verify these accounts.

3. Verify details. Next, verify your email and mobile number by entering the six-digit code sent to each. Finally, enter a secure password and select “Create”. 

4. Complete KYC to begin trading. Your account is now officially open. However, to start depositing AUD and buying cryptocurrencies, you must complete the KYC process. To do so, click on the profile icon in the exchange’s top right corner and select “Verification” from the drop-down menu.

5. Provide identity documents. All Australian verification processes require customers to submit images of a government-issued document. This can include a driver’s license or passport. Complete the on-screen instructions to unlock trading on your Swyftx account. It should only take a few minutes.

Start trading. Once verification has been confirmed (this is usually done automatically) users can deposit AUD to their accounts and start buying cryptocurrencies.