Stay away from White Label Crypto Exchanges


Why you should stay away from white label crypto exchanges: In this blog we detail how your money & assets may be at risk at many white label cryptocurrency exchanges.

What are white label crypto exchanges?

The term “White Label” originates from the record industry where vinyl records would be brought out with a plain white label and cover prior to general release. Supermarkets also joined the white label trend bringing out their own home brand products in plain white packaging, usually produced by a co-packer who would supply the exact same contents to different supermarkets with only the brand name differing. In the age of the internet there are countless examples of white label products, services and websites and sadly white label cryptocurrency exchange providers number in their dozens. But what are they in essence?

A white label crypto exchange is one which buys or rents all the software from one central supplier and then puts their own branding on the exchange and markets it themselves. To all intents and purposes this new exchange is simply a clone of the main exchange, often using the same customer service team, KYC team and even the same finance department dealing with all incoming and outgoing payments. The benefits to white label crypto exchange owners are plentiful making initial setup, maintenance and running costs far more affordable and of course much quicker to launch.

Where to buy Crypto

Not all white label cryptocurrency exchanges are bad

Before I start hammering nails into these exchanges and providers I do wish to point out that there are some very valid reasons why a white label exchange may be recommended. In countries, languages and markets where there are very few exchanges, opening up a licensed white label crypto exchange from a top provider is a good way for said market to gain a reputable exchange of its own (assuming the owners are also fully vetted and have ample insurance and financial backing in place). An emerging market can benefit from such an operation.

Another valid application of a white label exchange is in niche sectors, for example Tron dApps, EOS dApps, etc. Launching a white label exchange to cater for these markets can be a very useful way to go.

The dark side of white labels

The perfect example of where white labels are a bad thing is the online casino industry. There are some great white label casinos out there but 99% of white label casinos are just plain awful. And there are tens of thousands of them, we could fill our cryptocurrency casinos page with hundreds and hundreds of these clip joints but that would do a disservice to our readers because most of them would be plain crap where you would never see any money back no matter what. Most white label casinos are scams to make a quick buck before closing, re-branding and running off with your money.

While it is common knowledge about the problems in the online casino industry, but what then are the potential pitfalls for white label crypto exchanges?

Low barriers to entry

Make any industry cheap enough and accessible to mass entry and there will be an influx of scammers and con artists who smell the sweet scent of a quick buck at the expense of their honest, hard working customers. How many crypto exchanges have gone belly up? Many exchanges have exit scammed already so what is stopping a white label exchange owner from exit scamming with all your funds or faking their own death and forgetting to give anyone access to all the holdings? Only the legal system and fear of prison but as we all know too well, there are enough sick individuals in this world who will still take their chances.

Shoddy white label solution providers

It is not just the exchange owners who can be devoid of morals but the white label providers themselves. The cheaper the solution, the lower the quality of that product will be and this is true here too. Slow KYC, non existent customer service, higher transaction fees, poor platform technology and weak finance department are just some of the issues facing users of these low cost, low quality labels.

Liquidity problems

Some white label exchanges source their market liquidity from the parent exchange like the solutions provided by Coinsquare and Coinfield for example:

“We connect your brand new exchange to the large liquidity pool at our main global exchange “CoinField” to ensure your new cryptocurrency exchange will work like a charm. *Subject to approval of your application by our finance team and due diligence approval by our compliance team.”

However there are a greater number of providers which do not do this or they just don’t have the liquidity pool to start with. With liquidity problems come issues for traders where trades cannot be settled or it becomes near impossible to pull your funds out or buy the cryptocurrency you desire.

Security and the fear of hacking

How many times are we going to read about exchanges getting hacked? If a white label crypto exchange is reliant on the solutions provider to secure their exchange platform, can they be sure of the security against hacking? Is their website or mobile app safe enough? Are the cheap as chips solutions providers technically sound enough to prevent hacking? I know if I was a hacker and aimed my sights at hacking crypto exchanges, these white labels would be my first target. You can be your bottom dollar that massive exchanges like Binance are as secure as it gets but what about John Doe’s El Cheapo White Label Exchange?

The threat of Bankruptcy

Another major issue with white labels is that many just don’t have the financial backing to support themselves, particularly during an extended bear market like we have seen in 2018-19. Despite all the best intentions, some hard grafting honest exchanges have gone belly up and this does affect their customers.

Technical frailties

We have seen some cheap white label exchanges and their websites can be terrible. Cheap and nasty is how I would describe some, with one example in particular (which I am going to use as example to sum up this whole post) laughably not having a mobile friendly version making it absolutely, painfully impossible to use on a mobile device (and here is me thinking it is 2019 not 2009).

Summary: DCEX – An example of an awful white label cryptocurrency exchange

DCEX is a white label crypto exchange which “launched” in the early part of 2018. Except it didn’t really launch as nobody can do much of anything on it. Deposits and withdrawals are via email, liquidity is virtually zero and the platform just doesn’t really work at all. Red flags surround this exchange in other ways as well. Their business address is in the same street as Coinbase and they have used this as a selling point, only the last check we noticed was that they are simply using a “rent a P.O. Box address”.

To make matters worse a background check on the only 3 owners/employees they initially had listed on Linkedin (before they deleted their Linkedin traceability) pointed to guys with no real track record or credibility and who had previously launched a scam cryptocurrency which failed to gain enough traction to be profitable.

The final burn on this exchanges credibility was when their entire website changed from DCEX to Biccos. They copied the entire Biccos exchanges website and forgot to do the rebranding and forgot about it long enough for Google’s results for their domain to see their exchange called Biccos rather than DCEX. When questioned multiple times, DCEX either failed to respond at all, or after a long delay (days and weeks) they responded with a standard template reply about their exchange and with no mention at all about the questions asked. Biccos on the other hand were very quick to reply and were outraged their website had been copied and stated they had absolutely no knowledge of who DCEX were.

DCEX also claimed to be very close to Ripple and still advertise their website as the first globally to use XRP as sole base pair. They have used this selling point dozens of times over the past year to try and hook the XRP Community. Nik Bougalis (one of the key XRP engineers) responded to say that nobody at Ripple had ever heard of this exchange so all claims by DCEX to the contrary are completely false and fabricated.

Do your own due diligence before registering to any cryptocurrency exchange. Do not simply hand over your hard earned money to any old company with flashy talk and lots of promises.

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