CoinW, an exchange that has been frequently exposed in Taiwan recently, has really attracted the attention of investors; however, while its business continues to grow, its background and security are still questioned by some communities. The following summarizes the controversial points discussed in the community, and also asks CoinW to clarify some doubts.
What is CoinW Exchange?
According to the official website of CoinW, CoinW is a centralized exchange (CEX) established in 2017. It features a wide range of investment products, sufficient liquidity, more than 300 spot and 40 contract trading pairs, and supports more than 40 legal instruments. Coin and OTC deposit channels and other features.
The content reads that having a bank-level risk control system and actively cooperating with global regulatory compliance are its advantages.
Four controversial points about CoinW
(1) The place of registration has nothing to do with the place of jurisdiction, and the founder has not been disclosed
CoinW is an overseas company, and its official website claims that there are four related registration entities:
LCT Holding UAB LLC (judged to be a company registered in Lithuania)
LCT Holding Polish Limited Liability Company (judged to be a Polish registered company)
COINW LINK LTD (claimed partnership) (Canadian registered company)
BBT INC (claimed partnership) (US registered company)
It is said that "COINW LINK LTD" is a FINTRAC (Financial Transactions and Reports Analysis Center of Canada) cash flow service company registered in Canada. "BBT INC" is a company registered in MSB (Money Service Business) in the United States.
公告內文誤植 COINW 為 CPINW 註冊地與管轄地無關
The above information shows that each of the above companies belongs to different jurisdictions, and its "User Agreement" also mentions that the place of legal disputes and litigation is under the jurisdiction of "Saint Vincent", which is also a famous country in Latin America. international financial tax avoidance center.
It is understood that "LCT Holding UAB LLC" is a company registered in Lithuania in 2021, while "LCT Holding Polish Limited Liability Company" was only registered in Poland in December 2022, and there is no public information about the person in charge of the two entities. If you actually use the Google Street View service to view the company's physical address in Poland, you will find that it is located in the city center, in a row of inconspicuous residential areas, and does not even have a company door number or sign. It is similar to FTX's previous office in Berkeley.
Founder undisclosed
In addition, CoinW does not disclose information about its founder and only claims to be headquartered in Dubai. In the past, only some high-level information was announced, such as: "CoinW Global CEO Bai Mingguo", "Partner & VP Sonia Shaw", and "CCO Carmen Tan" in 2021.
In response, CoinW responded that it has never announced its founder in six years of operation.
(2) Claiming to hold a license is partially inconsistent with the actual situation
CoinW official website claims to have the following licenses:
US MSB license
Canadian MSB license
Lithuanian digital currency exchange and wallet license
Saint Vincent and the Grenadines Financial License (SVGFSA)
After inquiry, CoinW has indeed declared a US MSB (money flow service business), and also has MTL (money transfer license) from multiple US states. It can legally conduct cash flow exchanges between US states, such as the US compliance exchange Coinbase This approach is also adopted to serve American users. There are also registrations related to cryptocurrency exchanges in Lithuania.
No relevant information can be found for Canadian and St. Vincent license plates
Regarding the St. Vincent license, CoinW and its related entities are not on the SVGFSA’s list of registered entities, but have issued a press release stating that they have obtained the license.
In addition, Canada’s MSB registration website does not have current registration information for CoinW and its related entities. Judging from historical data, a company called "COINWINS EXCHANGE" did apply for registration on May 4, 2022, but withdrew it on October 20, 2022. The COINWINS EXCHANGE website, although defunct, dates back to April 2013, and the trademark is almost identical to the current CoinW.
2022 年加拿大註冊公司網站 申報海外 MSB 無實際保障
In fact, not only CoinW, but also many overseas exchanges will declare MSB to the United States. However, registering MSB does not mean that it has received regulatory endorsement from FinCEN. It is only the role of the company in registering with the government.
The MSB license itself or otherwise does not provide protection to investors outside the United States. It can only be used as a basis for the company to comply with anti-money laundering and counter-terrorism financing. Whether investors in crypto products can be protected still depends on the rule of law of the company where the user is located. area, whether it is subject to regulatory oversight. If the enterprise operates derivatives (such as contracts, futures options), it is not within the scope of MSB supervision.
CoinW intends to comply with regulations in Taiwan
CoinW responded: "For operations in the Taiwan market, we have taken or are taking necessary steps to ensure compliance with Taiwan's laws and regulatory requirements. This may include establishing a registered company in Taiwan and applying for corresponding licenses and money laundering prevention statements."
(3) Unknown token $CVNT appears in reserve assets? (already transferred)
Since the bankruptcy of FTX, exchange fund reserve certificates have begun to attract attention and are an important factor in whether an exchange can be trusted. However, something happened recently in CoinW that confused the community: a large number of unlisted tokens appeared in reserve assets and were quickly transferred.
Back on November 6, 2023, the currency price website CoinMarketCap showed that CoinW’s asset reserves were NT$7.393 billion, which included a large number of unknown currencies $CVNT, accounting for 89% of the total fund reserves.
The last web record was in June this year, when CoinW had accumulated $CVNT worth NT$5.17 billion. At that time, the total asset reserve was NT$5.93 billion, with CVNT accounting for 89%.
As soon as the news came out, it was widely discussed in the community (the original Dcard article has been deleted). The token was then moved to another wallet at 11am that morning, presumably still owned by CoinW, an address that holds nearly 38% of $CVNT’s token supply.
Now, by comparing CoinW's asset reserves on CoinMarketCap and GeckoTerminal, we can find that there are only about NT$935 million left. The user asset reserves have reduced from 7.3 billion to 900 million in a few days, a reduction of nearly 90%. It's quite a rare situation. And the currency has never been listed on the exchange. Previously, CoinW also held a large amount of the high-risk exchange JPEX platform currency JPC, reaching 28% of the total asset reserves, even higher than its own platform currency, which also caused controversy.
CoinW clarifies: $CVNT was originally going to be a listed token
CoinW explained this situation to Chain News: "CVNT was an asset that had been planned to be listed on the CoinW platform. The project team also prepared corresponding tokens for this purpose and carried out preparatory work before the transaction. However, according to the rules and evaluation of our institute, The final decision was not to cooperate with the CVNT project. This is part of our compliance and risk management strategy. Therefore, after full communication between the two parties, the project took back its token assets."
$CVNT Token Is Really Worrying
A deeper look into the $CVNT token that CoinW once had a large reserve of, will reveal that the trading pair of this token is unusually unpopular, which may also be the reason why CoinW did not launch CVNT trading in the end:
According to CMC data, the $CVNT token can only be bought and sold through the MEXC exchange. Even CoinW itself does not provide trading of the token, and the 24-hour trading volume of the token on MEXC is only a very small $26,000.
What is even more suspicious is that the price volatility of $CVNT in the past six months has been too regular and has little correlation with the overall market trend, suggesting market manipulation.
In addition, through a simple review of $CVNT’s token contract through Token Sniffer, the token received an astonishing 0 score out of 100 in the security assessment, indicating that it is a very high-risk token.
Simply put, the coin has the following concerns:
The contract contains ownership features and cannot be abandoned: the team has the right to modify the contract content, such as prohibiting sales, adjusting gas fees, or minting more tokens.
The number of tokens with holders accounting for more than 5% of the circulating supply: Some wallets hold a large number of tokens, which will likely have a large impact on the price when sold. It is reported that the top two holder addresses own 83.7% of the circulating supply of tokens.
There is no on-chain liquidity pool and the token cannot be traded (only through the MEXC exchange).
Similar phenomena are not unique to CoinW, investors should evaluate the risks
Since contract exchanges are generally not accepted by regulators, the compliance threshold is very high. Therefore, although spot exchanges are easier to comply with in various countries, most contract exchanges are unable to obtain direct compliance licenses and serve global users.
In the face of regulation, most contract exchanges choose to operate offshore, waiting for regulatory developments and opening up. Therefore, the places where these offshore exchanges are usually registered and the licenses they hold cannot cover the complete scope of actual business operations, as well as the local investor protection regulations of actual users. Only relying on "industry self-discipline" and "user trust" to operate, investors should evaluate and diversify risks by themselves to avoid financial losses in extreme situations.
For example, this year's offshore exchange JPEX incident, although the incident came to light, Taiwanese supervision did not directly protect investors, and the entire case is still under investigation.
(Taiwan has zero action against JPEX? JPEX has invested tens of millions of dollars in Taiwan, and its spokespersons and sponsoring media have made a lot of money)
This article 90% of unknown tokens flow into user asset reserves? An article to understand the CoinW exchange controversy and response first appeared on Chain News ABMedia.
