The competition for exchange licenses is likely to be a prolonged war in the cryptocurrency industry. While licenses reflect an exchange's comprehensive strength and are an essential part of its development, they do not directly determine its future trajectory.
In the long run, exchanges should focus more on the quality rather than the quantity of licenses. Additionally, after obtaining licenses, they should leverage them to:
- Deeply explore local user investment demands
- Expand their user base
- Enhance their ecosystem
Licenses as a Core Competitive Advantage
For cryptocurrency exchanges, government-issued licenses play a crucial role in compliance. The region and number of licenses have become key competitive differentiators, serving as a benchmark for an exchange’s risk control mechanisms and overall strength.
Before granting a license, regulators typically conduct thorough audits covering:
- Asset storage security
- Customer data protection
- Technical reliability
Exchanges must invest substantial resources to meet these compliance standards and maintain high-level risk controls.
With frequent incidents of exchange hacks and scams, security mechanisms are more critical than ever. Many countries are tightening regulations on non-compliant exchanges—Binance and other major exchanges have been forced to exit markets like Japan, shrinking their customer bases.
As global regulatory scrutiny intensifies, compliance may become the lifeline for exchanges.
Despite the high costs, acquiring licenses remains a top priority. Holding licenses boosts investor confidence and enables exchanges to conduct marketing and promotional activities more effectively.
However, some exchanges obtain licenses from lenient jurisdictions primarily for PR purposes rather than long-term growth—using them to enhance visibility or manipulate token prices.
License Acquisition Strategies
Since 2018, as countries like the U.S., Japan, Australia, and Estonia clarified exchange regulations, major platforms have aggressively pursued licenses through:
- Direct applications
- Establishing separate compliant platforms
- Partnering with local entities for joint applications
- Acquiring licensed local exchanges
In 2019, license demand dipped as Japan and others raised approval barriers following security breaches. However, recent months have seen renewed interest:
- OKEx secured a Japanese license (March 30)
- MXC obtained an Australian financial services license (March 30)
- Singapore’s PSA exemption listed Coinbase, BitStamp, and Upbit (March 24)
- South Korea passed a licensing framework (March 5)
These developments suggest another wave of license competition, potentially reshaping industry rankings—particularly for mid-tier exchanges seeking legitimacy.
Exchange License Comparisons
1) Huobi
A veteran exchange with strong influence, Huobi has four confirmed licenses:
- U.S. (MSB, 2018)
- Japan (via BitTrade acquisition, 2018)
- Gibraltar (DLT, 2018)
- Thailand (2019)
Huobi also engages with Chinese regulators through initiatives like the Blockchain Service Network (BSN).
2) MXC
A fast-rising player, MXC has rapidly secured three licenses in four months:
- Estonia (MTR, Dec 2019)
- U.S. (MSB, Jan 2023)
- Australia (March 2023)
This speed highlights its compliance focus and risk control standards.
3) OKEx
Despite criticism over liquidity and trading issues, OKEx holds:
- U.S. (MSB, 2018)
- Philippines (2018)
- Japan (March 2023)
It also collaborates with local governments, including a blockchain lab in China’s Hainan province.
4) Binance
The most internationally diversified, Binance emphasizes local fiat exchanges in smaller nations (Singapore, Uganda, U.S.). However, its licensing claims have faced skepticism—Malta’s regulator explicitly denied overseeing Binance (Feb 2023).
Key Takeaways
- License competition will be long-term but not decisive for success.
- Quality > quantity: Exchanges must leverage licenses for user growth and ecosystem development.
- Mid-tier exchanges like MXC and OKEx are accelerating compliance, signaling a shifting landscape.
👉 Explore compliant trading platforms
FAQ Section
Q: Why are licenses important for crypto exchanges?
A: They ensure regulatory compliance, enhance security, and build user trust.
Q: Which countries have strict crypto exchange licensing?
A: Japan, the U.S., Singapore, and South Korea have rigorous frameworks.
Q: Can exchanges operate without licenses?
A: Yes, but they risk bans, fines, or loss of user confidence.
Q: How do licenses affect exchange rankings?
A: Licensed exchanges gain credibility, attracting more institutional and retail investors.
Q: Are all licenses equally valuable?
A: No—licenses from highly regulated jurisdictions (e.g., Japan) carry more weight than those from lenient regions.
👉 Compare top licensed exchanges
This analysis underscores the strategic role of licensing in crypto exchange dominance—balancing compliance, security, and expansion.