What Are Nested Exchanges and Why Should You Avoid Them?

A nested cryptocurrency exchange provides its customers with crypto trading services through an account on another exchange. It does not facilitate trading directly itself. Instead, it acts as a bridge between users and other service providers. Nesting is commonly used in traditional banking to provide services a specific bank can't, such as international transfers. In the crypto space, nested exchanges often have lax KYC and AML processes or none at all. This lack of compliance is often explored by cybercriminals. Nested exchanges support money laundering, scammers, and ransomware payments. When you trade with a nested exchange, you are trusting it with the custody of your assets. They provide less security and fewer guarantees than a compliant centralized or decentralized exchange. You can also face legal issues for dealing with sanctioned nested exchanges. If you use an exchange, make sure it has proper KYC and AML checks. These often take days to process. If the exchange allows you to trade almost instantly without limits, you should investigate it further. A legitimate exchange won't hide how trades are made, and you can easily view the source of your funds on a blockchain explorer.