From Examining the Authenticity of Exchanges to the Challenges Faced by Traders
Iranian traders have always faced challenges when selecting a suitable cryptocurrency exchange, “suitable” in the sense that Iranians, like other parts of the world, should have access to various investment models and order types in the broad space of digital currencies, particularly within a globally trusted framework. The first part of this article examines the details of this challenge. Furthermore, it scrutinizes the authenticity of foreign cryptocurrency exchanges that provide services to traders residing in Iran. Finally, the article explores the potential reasons why some foreign exchanges continue to offer services to Iranian traders despite sanctions, highlighting the fact that such service provision could, under certain circumstances, easily lead to the exploitation of Iranian users’ capital.
Table of Contents
The Challenge Iranians Face in Using Foreign Cryptocurrency Exchanges
Cryptocurrency traders in Iran have always faced a more challenging and unfair situation than users in most other parts of the world. On one hand, consider the international financial sanctions on Iran, which make access to advanced and globally recognized financial tools and platforms more difficult or restricted for the residents of this country. On the other hand, consider the global and borderless nature of cryptocurrencies, which encourage Iranians to access international tools and circumvent sanctions. This situation resembles that of a thirsty person who is aware of the existence of water but has a harder and costlier time accessing it than others. Such circumstances often lead to the exploitation of traders residing in Iran.
To better understand this, recall how the exchange “KuCoin” operated in relation to Iranian traders:
This exchange was providing services to Iranians without requiring identity verification, in a completely transparent manner. As a result, a significant amount of capital from Iranian traders was parked in KuCoin accounts, so they could execute their trading strategies using the advanced tools that were not available on domestic exchanges.
However, on July 15, 2023 (July 24, 1402 in the Iranian calendar), KuCoin announced that from that point onward, users would need to complete identity verification to use the platform—something individuals with personal and banking information from certain countries, including Iran, could not do. Consequently, these users were required to withdraw their funds from the exchange within a limited timeframe.
At first glance, the issue may seem simple, and one might think that this sudden change in KuCoin’s policies or those of other similar exchanges wouldn’t pose a particular challenge to Iranian traders, as they could easily withdraw their funds and transfer them to other platforms. However, the reality is quite different.
The Consequences of Changes in Identity Verification Policies for Iranian Traders
Restrictive decisions and policies that are inconsistent with the circumstances of Iranian users, especially when suddenly implemented like KuCoin’s, have the potential to significantly disrupt traders’ strategies. This could force them into making decisions that contradict their pre-established trading style, which in some cases can lead to substantial financial losses. To illustrate, consider the simplest possible scenario:
Suppose a trader has open positions that are currently in a loss at the time the exchange announces this decision. If the trader’s style is to be patient and manage positions until they turn profitable, this strategy is no longer viable under the new exchange conditions. The trader is forced to close these positions at a loss, withdraw their funds, and, in the process, pay unwanted fees.
These types of harmful and challenging decisions for Iranians are not limited to KuCoin alone. Other well-known platforms and exchanges, such as “Binance,” “MetaMask,” and even “BingX,” have also followed similar policies in the past. In many cases, this has resulted in Iranian users being unable to access their funds in a restricted platform. If we consider the total amount of such funds, it could represent a significant sum—capital that will ultimately belong to the platform that implemented the decision.
Therefore, it is not unlikely that behind these kinds of decisions and policies, there are pre-planned schemes designed to benefit the foreign exchange at the expense of Iranian traders.
If, up to this point, a small part of the problems Iranian traders face in using foreign exchanges has become clear to the reader, the next step is to answer some of the following questions:
First. Why do Iranian users have to turn to foreign platforms and exchanges for participating in and investing in the cryptocurrency market? What gaps or deficiencies exist within Iran and its domestic exchanges that lead them to seek foreign alternatives? Is there no solution to address these shortcomings?
Second. If we assume that Iranian cryptocurrency traders prefer foreign platforms for any reason, do they investigate the authenticity and potential policies of their chosen exchange? Or what parameters should they consider to minimize the risk associated with their decision?
Why Iranian Traders Turn to Foreign Exchanges
The answer to this question can be summarized as follows:
On one hand, unfortunately, domestic platforms and exchanges are not as advanced as their foreign counterparts and have, so far, been unable to compete in providing a wide range of sophisticated and diverse trading tools. They have not been able to provide services that could satisfy traders with different strategies in Iran and make them independent of foreign exchanges.
However, this deficiency cannot solely be attributed to the lack of technical expertise and capabilities of domestic exchanges. In many cases, this is a result of the regulatory and legal constraints imposed by lawmakers, which hinder their development.
On the other hand, one must accept the fact that capital and investment are inherently cautious, meaning investors are always looking for the most logical way to protect themselves from greater losses and risks. In such circumstances, even the mere rumor of a “capital gains tax bill for cryptocurrencies” and similar regulatory decisions, along with the borderless and elusive nature of digital assets, strongly leads cryptocurrency traders to foreign exchanges.
It is, therefore, clear that in order to reduce Iranians’ use of foreign exchanges, finding a solution does not require complex strategies. In other words, if the lawmakers and regulators in Iran make smart decisions and set policies in a way that domestic platforms no longer have the excuse of regulatory restrictions for their growth and development, and at the same time create a secure environment with minimal risk for the existing capital and liquidity in this industry, then this sector could thrive on domestic platforms.
At the same time, domestic platforms should improve their technical capabilities and trading tools to a level where Iranian traders active in the crypto world will be attracted and no longer need foreign alternatives.
Let us conclude this section by focusing on the answers to the first set of questions (practical solutions to reduce the use of foreign platforms by Iranian traders). Therefore, the next part of the article will analyze foreign exchanges that are currently being used by Iranian users—an analysis that can help traders identify these exchanges and the parameters for determining their authenticity (answering the second set of questions).
In this analysis, we will exclude exchanges such as Binance and KuCoin because these exchanges no longer provide services without identity verification, and their founders are well-known. Therefore, their authenticity has been established, and they are recognized as globally credible.
Instead, we will focus on exchanges that are still providing services to Iranian users without identity verification and without significant restrictions. These exchanges have been widely used by Iranian traders but are less known compared to the most reputable platforms in the industry. Examples include exchanges like “LBank” and “MEXC.”
Scrutinizing the Authenticity of Foreign Exchanges Working with Iranians
Given Iran’s position in terms of international sanctions, you might wonder why some global platforms (either publicly or secretly) are willing to take this risky step and offer services to Iranian users—a move that could expose them to various penalties, such as being barred from accessing U.S. financial and commercial facilities, imprisonment of the platform’s executives, and other financial crimes.
In other words, there are many examples of platforms that have been accused of violating international sanctions against Iran and have been punished as a result. This raises the question: are foreign exchanges currently working with Iranians unaware of this? Or are they genuinely fond of Iranians? The answer is undoubtedly no.
To understand the details of this issue and the main reasons behind it, let us first conduct a comprehensive review of five exchanges that (at the time of writing this article) offer services to Iranians without identity verification. This review will provide the reader with insights into the primary reasons behind these platforms’ decisions to serve Iranian users.
Finally, in the last part of the article, we will introduce some possible reasons behind the foreign exchanges’ provision of services to Iranians.
| Exchange Name | binance | BingX | MEXC | CoinEx | LBank | Bitunix |
|---|---|---|---|---|---|---|
| Credibility Rank (among 252 exchanges listed on CoinMarketCap) | 1 | 15 | 11 | 73 | 17 | 110 |
| Daily Trading Volume (at the time of writing this text) | Approx. $16 billion | $500 million | $2 billion | $150 million | $2.1 billion | $600 million |
| Identity Verification | Mandatory (impossible for Iranians) | Optional | Optional | Optional | No identity verification | Optional |
| Number of Users | Over 170 million | 10 million | Over 10 million | Over 5 million | Unspecified | Unspecified |
Source: CoinMarketCap
1. BingX Exchange
BingX is a centralized cryptocurrency exchange widely used in Asia. This exchange was founded in 2018 by a person named Josh Lu, who is currently the CEO of the platform. According to his LinkedIn profile, Josh Lu has around two years of experience in the blockchain and payment solutions industry. Before that, he worked for approximately four years as a Product Engineer at Nvidia.
Reports indicate that the BingX team is based in Singapore. However, a review of the official exchange website, bingx.com, reveals that BingX does not have a centralized headquarters and has not disclosed any physical address.
In terms of legal licenses, it seems that BingX operates under regulations from countries such as Lithuania and Australia. According to claims made by the exchange, it holds licenses in the mentioned jurisdictions and has branches in North America, Canada, the European Union, Hong Kong, and Taiwan, which have received regulatory approval from these countries.
It’s important to note that these regions require active financial service providers to comply with local service laws and Anti-Money Laundering (AML) regulations. Other than these, BingX has not officially disclosed any specific licenses from regulatory bodies outside of the mentioned jurisdictions.
Additionally, although the platform has frequently been accused by the media of openly serving Iranians, it has not faced any significant regulatory issues and continues to operate, even openly advertising its services to Iranian users in the Persian language.
Reports from domestic sources, including Media Blockchain, show that Iranian users can easily complete identity verification on this exchange with Iranian documents, and no issues arise with their accounts. However, accounts that operate without identity verification are always at risk of security issues, and as a result, there are restrictions on withdrawals and trades for such accounts.
Another important issue regarding Iranian users’ use of this exchange is that, in the “Terms of Agreement” section, which users sign when verifying their identity and confirming account creation on BingX, it is mentioned that the exchange can change all current conditions at any time and at its discretion, and users are required to regularly review this section.
An interesting note about BingX is that in the disclaimer section of the site, it states that it does not offer services to users from countries like Iran, Iraq, Lebanon, Sudan, Somalia, etc. However, the exchange provides support in the Persian language, and its support team has not listed Iran among the countries to which it does not provide services.
2. MEXC Exchange
MEXC is another exchange without a clear geographical location that has gained considerable popularity among Iranian traders due to the lack of mandatory identity verification. This exchange, which calls itself “MEXC Global,” claims to operate in more than 170 countries and does not require any disclosure of its central office address, maintaining an international and decentralized approach in all jurisdictions. As a result, there is no indication of a central office on its official website, mexc.com.
MEXC was founded in 2018 by a person named John Chen. According to his LinkedIn profile, John Chen appears to be from Singapore and is a graduate of the country’s top universities. Additionally, according to his work history, Chen worked as the CEO of MEXC from early 2021 to mid-2022. Since mid-2022, he has held the position of “Member of the Management Partners.”
An important point is that John Chen does not list MEXC with its full name on LinkedIn but instead uses the name “Miix Global,” a title that does not appear in Google searches or even on LinkedIn itself.
This suggests that, following the introduction of stringent regulatory restrictions by U.S. regulators on such exchanges (which offer services without identity verification), John Chen may prefer to conceal his association with MEXC to continue operating more anonymously.
In the section describing John Chen’s history with MEXC, it is mentioned that the exchange started its legal operations in five major markets: Switzerland, Canada, Australia, and the United States. Additionally, it continues to maintain an active presence by supporting languages like English, Russian, Korean, Portuguese, and others from different regions worldwide.
On the other hand, based on the regulations of the jurisdictions that MEXC claims to be licensed in, it is required to adhere to international standards for financial operations, including Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. However, in practice, these regulations are not followed, and users can easily engage in cryptocurrency transactions on this platform without identity verification, which raises concerns regarding the discrepancy between the exchange’s reports and its actual practices.
3. CoinEx Exchange
Although the previous two exchanges, BingX and MEXC, have gained particular attention from Iranians over the past one or two years, the history of Iranian traders using CoinEx dates back more than three to four years, and it seems that some Iranian users still use it. Despite this, CoinEx continues to operate without any particular restrictions from regulators.
There is little reliable and comprehensive information available about the owner or founder of this exchange, but some reports suggest that the CEO of CoinEx is a person named Haipo Yang.
In an interview with Yang, when he was asked to introduce himself and CoinEx, he said, “I am the founder of CoinEx. My journey into the world of cryptocurrencies began in 2011 during the first Bitcoin (BTC) bull market. Inspired by this open-source technology and its promises of freedom, I delved deeper into the field. I then realized the transformative potential of blockchain-based innovation. This realization led me to establish CoinEx in 2017 with the vision of creating a global exchange to make cryptocurrency trading easier and more accessible for everyone. Since then, CoinEx has grown and now serves over 5 million users across more than 200 countries and regions.”
Haipo Yang is also known as the CEO of ViaBTC, one of the largest Bitcoin mining pools. Furthermore, CoinEx’s website mentions the close relationship between CoinEx and ViaBTC Group, indicating that the leadership and ownership of this exchange are deeply rooted in the cryptocurrency mining sector.
CoinEx, accessible at coinex.com, does not provide any information about the existence of a physical location for its headquarters. Similar to the previous exchanges, CoinEx operates as an online platform without the need for a physical office.
Initially, CoinEx’s website listed an address in Estonia as the location of the exchange’s operations, but this information has since been removed. Additionally, some social media profiles, including LinkedIn, list CoinEx’s physical location in Hong Kong.
In terms of regulation, CoinEx has not reported receiving any specific legal licenses from a regulatory authority anywhere in the world. While the jurisdictions it claims to operate in would require it to comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) laws, it continues to offer services without identity verification, which violates these laws.
The Shift of Iranian Users from Popular Exchanges
While the three exchanges mentioned are among the most commonly used foreign cryptocurrency exchanges by Iranian users, it seems they have recently started to impose new restrictions, sending warning emails about the potential cessation of services to their Iranian users. This has caused Iranian users to seek new platforms, and the shift of Iranian traders to new foreign platforms continues.
LBank has become the current destination for Iranian traders, as it does not impose any restrictions on providing services to Iranians. Consequently, it has been widely advertised in domestic media. Given the current growth rate and the number of Iranian users it is attracting, LBank is expected to become the most popular foreign exchange serving Iranian users in the coming months. The next section will focus on the credibility and legitimacy of LBank.
LBank Exchange
According to the official website of LBank, lbank.com, the exchange started its operations in 2015. The ownership and leadership of the platform have largely remained undisclosed. Like some other projects in this industry, LBank operates under a vague corporate structure with almost no public information about the team managing and developing the platform. However, there is information on some social media platforms, such as LinkedIn and Crunchbase, that shows a person named Eric He is the CEO and president of this exchange.
LBank offers services beyond cryptocurrency trading, including lending, staking, NFTs, and investment funds. According to reports from active media in this field, the exchange collaborates with various blockchain projects and the DeFi (Decentralized Finance) industry by listing their cryptocurrencies and providing liquidity or funding services, from which it generates income. However, there has not been any clear or detailed report about its investments and business partnerships from LBank itself.
When it comes to the legal and regulatory status of LBank, the exchange claims to be a safe platform for cryptocurrency trading and holds three legal licenses:
- National Futures Association (NFA) approval from the United States
- Money Services Business (MSB) license from the United States
- MSB license from Canada
The NFA in the U.S. is one of the most influential organizations regulating futures markets, aimed at protecting the integrity of the U.S. futures market. Reports show that when a company receives approval from the NFA, it means that all of its financial resources have been reviewed and audited.
All advertising by such companies is continuously reviewed, and any violations result in immediate restrictions on the company, followed by investigations. Depending on the results of the investigation, the company may face severe penalties, including the potential revocation of its license.
On the other hand, having an MSB license in the U.S. means that the company operates under the supervision of the Financial Crimes Enforcement Network (FinCEN), part of the U.S. Department of the Treasury. This network scrutinizes a wide range of financial services, such as international remittances, foreign currency exchanges, and transactions or transfers related to currencies (including cryptocurrencies), ensuring their compliance with U.S. financial regulations.
In Canada, businesses holding an MSB license are also required to ensure transparency in their financial transactions and comply with anti-financial crime regulations, including those against money laundering and terrorism financing.
Given these explanations and the restrictions associated with the aforementioned licenses, the following questions arise: How can LBank Exchange hold these licenses while clearly offering services to Iranian users? Or even advertise its services within Iran? What does this contradiction signify?
Regarding LBank’s headquarters and physical address, as previously mentioned, there is no precise information available about its team and the exchange’s developers. However, LBank claims on its official website to have established offices in several countries, including Indonesia, the United States, Canada, Australia, Lithuania, and the United Arab Emirates. The exchange’s main operational headquarters is reported to be located in Indonesia.
Overall, our study indicates that none of the exchanges mentioned in this report hold licenses for financial activities outside the scope of cryptocurrency exchanges, such as brokerage services for buying and selling stocks.
Based on on-chain reports focusing on the addresses of these exchanges, it appears that most of these platforms use standard and common methods in the field, such as a combination of hot and cold wallets to secure users’ funds. While the details of fund management and user information remain part of internal and confidential policies, these exchanges often emphasize their security measures and the protection of user information in most of their reports.
The Profitability of Foreign Exchanges in Providing Services to Iran
In April 2024, Cointelegraph.com published a report titled “BingX Exchange Openly Supports Iranian Users, Defying Sanctions.” This well-known cryptocurrency media outlet highlighted the issue of BingX’s illegal services to Iranians worldwide through this report.
Below, we summarize key sections of the report, accompanied by images extracted from it. The report represents a significant media attack on BingX.
1. A Telegram user claimed that BingX has no issues with Iranian users and even facilitates their identity verification process using Iranian national ID cards as much as possible.
2. In another post on the official Discord account of BingX, a user asked, “Is there any restriction on registering from Iran?” A BingX representative responded: “It’s okay… just follow the registration steps.”
3. BingX also offers the ability to exchange Iranian Rials (IRR) for Tether (USDT) in its user panel. According to the regulations of the U.S. Office of Foreign Assets Control (OFAC), this action is prohibited.
4. Sanctions broadly prohibit Iranian residents from using centralized cryptocurrency exchanges. These exchanges risk being banned from U.S. and global markets if they engage in transactions with Iranians. According to OFAC, foreign financial institutions (FFIs) face severe risks if they knowingly facilitate or conduct transactions involving the Iranian Rial. However, it appears that BingX disregards these risks. Furthermore, the nationality of BingX’s founder remains unknown.
5. BingX is not the only cryptocurrency exchange circumventing sanctions for Iranian users. In July 2022, Reuters reported that the world’s largest cryptocurrency exchange, Binance, provided services to Iranian citizens. At the time, Binance denied these claims, asserting strict compliance with sanctions. Nevertheless, in November 2023, Binance agreed to a $4.5 billion settlement with the U.S. Department of Justice and Treasury, admitting it had failed to maintain effective anti-money laundering policies. Additionally, its former CEO, Changpeng Zhao, admitted to violating the Bank Secrecy Act.
6. In May 2023, another exchange, Poloniex, paid a $7.6 million fine to OFAC. The penalty stemmed from Poloniex’s failure to screen users from countries like Iran, Cuba, Sudan, and Syria who had registered before implementing “Know Your Customer” (KYC) controls.
This report clearly demonstrates that the issue of overt or covert services provided by foreign platforms to Iranian users must have serious underlying reasons—reasons that make the profits of these exchanges outweigh the consequences of media attacks, financial penalties, and regulatory violations.
Reasons for Foreign Exchanges to Provide Services to Iran
Our sources in this report suggest some potential reasons that convince foreign exchanges to offer services to Iranians, including the following:
1. The Profitability of Accepting Iranians’ Risk
Consider the old proverb, “No cat catches mice for the sake of God”; a perfect example of this proverb is foreign exchanges that accept the legal and credit risks associated with serving users in sanctioned countries, because doing so could bring potential financial and revenue benefits. In this section, we will highlight factors that significantly boost foreign exchanges’ profits from Iranian users:
High Demand in the Iranian Market:
Due to the economic situation in Iran over the past few years, such as the devaluation of the national currency, limited access to international financial markets, and the significant increase in the value of Bitcoin against the Iranian Rial, the demand for investment in the cryptocurrency market has grown exponentially. This large volume of demand and the presence of customers creates a strong incentive for exchanges to attract these users by any means necessary.
Limited Recourse for Iranian Users to Pursue Their Rights:
You may have heard the story of the MT.Gox exchange hack. This exchange, which was the largest cryptocurrency exchange in the world in 2013, was hacked in 2014, and 750,000 Bitcoin (worth approximately 50 billion dollars at the current Bitcoin price) belonging to the exchange’s customers were stolen.
Customers’ lawsuits and regulatory follow-ups took more than seven years; however, eventually, the exchange was convicted and forced to repay users. Despite this, the repayment process is still ongoing. Now, imagine a similar issue occurring with one of the exchanges serving Iranian users. In such a case, Iranian users would not be able to pursue their claims through any regulatory body, and the exchange could easily resolve the issue in its favor; this issue even facilitates actions, whether deliberate or accidental, by the exchange to misuse Iranian users’ funds, knowing that Iranians cannot pursue the matter through regulatory channels.
2. The Decentralized Nature of Cryptocurrencies:
One of the main characteristics of cryptocurrencies is their decentralized and borderless nature, which allows them to often operate outside traditional financial systems and regulatory controls. This allows exchanges, especially those with less reliance on traditional banking systems, to potentially operate in jurisdictions that are restricted by international sanctions.
3. Regulatory Arbitrage:
Some exchanges obtain operating licenses in stricter jurisdictions but, in practice, begin their physical presence and provide services in jurisdictions where bypassing international sanctions is easier. This creates opportunities for exchanges to engage in regulatory arbitrage, allowing them to focus on providing services to sanctioned countries and continue their investments without significant issues for a limited time.
4. Use of IP Changing Technologies:
The use of technologies like VPNs (Virtual Private Networks) and VPS (Virtual Private Servers) allows users from sanctioned countries like Iran to change their geographical location when accessing global services. This solution can be a reason for foreign exchanges to keep their services to Iranian users discreet while continuing to profit from Iranian customers’ investments on their platform.
5. Humanitarian Considerations:
While in reality, especially in the profit-driven world of financial markets, the importance of this reason may seem diminished, some foreign exchanges providing services to Iranians may have underlying humanitarian motives. Some of these entities may view their continued operations in sanctioned areas as a stance against unfair restrictions on financial freedoms of ordinary people. They believe that the cryptocurrency industry and the encrypted nature of these assets are the best tools to bypass legal frameworks that are unfairly imposed and monopolized by global powers.
Conclusion
Although it is often advised that “the biggest risk is not taking risks,” this phrase does not hold true in all aspects, and sometimes the safest decision is not to take risks at all. Working with any party that holds the power carries significant risks. The situation in Iran has allowed foreign exchanges, where millions of dollars of Iranian capital are invested, to hold power to the point that they can easily lock Iranian investors’ funds under the pretext of being attacked or any other reason at any given moment.
It is hoped that a situation will arise where Iranians’ credibility is recognized internationally, just like other parts of the world, so that they will not face restrictions in using reputable and well-known exchanges such as Binance. If this is not possible, the internal situation should be strengthened to the extent that there is no need to use foreign exchanges. This internal change is based on two fundamental pillars: first, comprehensive support from the ruling authority, and second, the effort of the private sector. Finally, a note from an Iranian trader to the legislator:
“Either enable the use of Binance, or strengthen domestic alternatives so much that I don’t have to resort to platforms like BingX!”
Sources:
https://www.linkedin.com/in/john-chen-60aa9627/?profileId=ACoAAAWtbOoBbIVMQ2zG9MRUPF7kEsQhwBw9M5M
https://cointelegraph.com/news/bingx-exchange-iran-sanctions-evasion
https://coinedition.com/coinex-ceo-haipo-yang-explains-the-significance-of-epic-sat-auction
https://support.lbank.com/hc/en-gb/articles/21281433214105-LBank-Introduction
https://mihanblockchain.com/lbank-exchange-review-for-iranian-users
