Compliance Issues
Despite the decentralized and "permissionless" nature of the cryptocurrency space, cryptocurrency exchanges are bound by regulations. As cryptocurrencies gain mainstream acceptance, exchanges face increasing scrutiny from financial authorities. In the United States, exchanges must adhere to strict Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, necessitating user identity verification and monitoring of suspicious transaction patterns that could indicate illicit activities.
If a particular cryptocurrency is associated with criminal or dangerous activities, exchanges may deem it too risky to support. Privacy-focused coins like Monero, linked to dark web usage, have been delisted by crypto exchanges such as Coinbase, Bittrex, and ShapeShift, while others continue to support it.
Moreover, countries occasionally impose bans or stringent regulations on cryptocurrencies. Exchanges operating within such jurisdictions may be required to delist coins that have become illegal or violate sanctions against specific countries or entities.
To avoid regulatory repercussions, exchanges cannot afford to list non-compliant cryptocurrencies. If a coin's legal status is unclear or regulators raise concerns, a delisting often follows swiftly.
