Why do some exchanges not allow US users?

The US has complex regulatory requirements, and agencies like the SEC and CFTC aggressively enforce against exchanges offering unregistered securities or derivatives. To avoid legal liability and massive fines, many international exchanges (like Binance.com or Bybit) block US users entirely using IP blocking and KYC verification.

What does it mean when an exchange is 'licensed'?

A licensed exchange has applied for and received formal authorisation to operate in a specific jurisdiction. This usually requires proving they have adequate capital, robust cybersecurity, strict KYC/AML processes, and competent management. Examples include a BitLicense in New York or MAS approval in Singapore.

Why do exchanges delist tokens?

Exchanges often delist tokens due to regulatory pressure. If the SEC claims a token is an unregistered security, US exchanges will typically delist it to avoid being accused of facilitating illegal securities trading. They may also delist privacy coins (like Monero) to comply with AML requirements.

Are decentralised exchanges (DEXs) regulated?

Currently, DEXs operate in a regulatory grey area. Because they are self-executing code (smart contracts) with no central company custodying funds, traditional financial regulations are difficult to apply. However, regulators are increasingly targeting the developers who build DEX interfaces or the governance token holders.

Guides · Exchanges

How Crypto Exchanges Are Regulated

Why your exchange asks for ID, why certain tokens get delisted, and how the global patchwork of licensing shapes the platforms you use.

By Ashir Khan2 min read

Ashir Khan writes about cryptocurrency security, self-custody, macro market analysis, and regulatory policy at CryptoBeacon.

Last updated: September 1, 2026

The shift from wild west to licensed entities

In crypto's early days, exchanges launched globally from offshore jurisdictions with zero oversight. Today, operating a centralised exchange (CEX) requires extensive licensing. Regulators categorise exchanges as Virtual Asset Service Providers (VASPs) or Money Services Businesses (MSBs), bringing them under the umbrella of traditional financial law.

What regulators require of exchanges

To receive and maintain a license in a major jurisdiction, an exchange must prove compliance in four main areas:

AML & KYC: They must verify the identity of every customer and monitor transactions to prevent money laundering and terrorist financing. Learn more about AML.
Asset Custody & Segregation: Post-FTX, regulators demand proof that customer funds are segregated from the exchange's corporate funds and are backed 1:1, often requiring independent Proof of Reserves audits.
Market Integrity: The exchange must have surveillance systems to prevent wash trading, spoofing, and market manipulation on their order books.
Capital Requirements: Exchanges must hold sufficient capital reserves to survive market downturns without risking user funds.

Geofencing and fragmentation

Because regulation varies wildly by country, exchanges use "geofencing" — restricting access based on a user's location (via IP address and KYC data). This leads to a fragmented market:

The "Global" Exchange

Often based offshore. Offers thousands of tokens, high leverage, and derivatives. Blocks US and UK users entirely to avoid the wrath of the SEC and FCA.

The "Local" Exchange

E.g., Coinbase US or Binance US. Fully licensed locally. Offers fewer tokens, lower leverage, and strict fiat on-ramps to comply with local laws.

Token listing and delisting

Exchanges do not list tokens purely based on demand. In the US, exchanges are terrified of listing a token that the SEC might later classify as an unregistered security. If they do, they face lawsuits. Therefore, compliance departments heavily vet tokens before listing, and will rapidly delist tokens if regulatory action is taken against the token's founders (e.g., XRP in 2020).

Similarly, privacy coins like Monero (XMR) have been delisted by numerous exchanges globally because their anonymity features make it impossible for the exchange to comply with the FATF Travel Rule for AML.