Crypto Exchanges Gamify Trading, Obscure Risks, and Lack Transparency

Consumer Reports has released an evaluation of five major cryptocurrency exchanges, revealing significant gaps in consumer privacy, safety, usability, and transparency. The report analyzed Binance.US, Coinbase, Crypto.com, Gemini, and Kraken using CR's Fair Digital Finance Framework.

The framework prioritizes consumer safety, privacy, transparency, user-centricity, inclusivity, support for financial well-being, and environmental and social governance. While all exchanges made buying and selling cryptocurrencies easy, they often lacked transparency around pricing and risks, burying such information in dense legal disclosures.

The evaluation found that all exchanges use gamification tactics like rewards, sweepstakes, and challenges to encourage frequent trading behavior, which can amplify losses and add tax burden of short-term capital gains. The report notes that these features are similar to those found in online sports gambling apps.

Gemini stood out for its 'trust-based' custody structure, regulated under a New York state trust charter, which keeps investor assets separate via an outside manager. However, only Gemini forced users to actively sign off on multiple fraud acknowledgments before executing a transaction.

The report also highlighted that all exchanges except Gemini hid spreads entirely within transaction flows, masking the true cost of execution. In 2022, Chainalysis reported that retail investors lost a staggering $17 billion to crypto scams and fraud.