Something to Avoid: Nested Exchanges

2 August 2023

5m read

Customers of a nested cryptocurrency exchange can trade cryptocurrencies using an account on another exchange. It does not immediately facilitate trading. It serves as a link between customers and other service providers instead. In conventional banking, nesting is frequently utilized to offer services that a particular bank cannot, including foreign transfers.
Nestled exchanges in the cryptocurrency industry frequently have nonexistent or inadequate KYC and AML procedures. Cybercriminals frequently investigate this lack of compliance. Nested exchanges help with ransomware payments, scams, and money laundering.
You entrust a nested exchange with the custody of your assets when you trade with it. Compared to an exchange that is compliantly centralized or decentralized, they offer less security and fewer assurances. Legal repercussions for dealing with authorized nested exchanges are another possibility.
Make sure an exchange has appropriate KYC and AML checks before using it. Processing these typically takes days. If the exchange enables limitless, virtually instantaneous trading, you should look into it more. A trustworthy exchange won't conceal the process of making trades, and a blockchain explorer makes it simple to see where your money came from.


Use a reputable website while trading cryptocurrency when you're buying and selling. To keep oneself safe, you must exercise patience when performing KYC and AML processes. Because of this, some customers opt to use exchanges that provide rapid trading and minimal or no sign-up checks.
While some decentralized exchanges might be trustworthy, others might be nested exchanges that deal with monies that have been stolen or laundered. A nested exchange can never guarantee the security of your money. It's crucial to comprehend what nested exchanges are, what they accomplish, and how to spot them if you want to keep your cryptocurrency secure.

What exactly is nesting?

When a financial service provider sets up an account with another financial institution to access their services, this is known as nesting. After then, the account holder serves as a bridge by providing services to their clients through the nested account. Numerous factors contribute to this. Correspondent banking is the practice of a bank in one nation offering its banking infrastructure and services to a bank operating in another nation.
Consider a client who wants to send money to an Australian bank account. They could utilize a correspondent bank to transfer the monies for them if their bank is unable to do so. Through its nested account with the correspondent bank, the customer's bank would handle the transfer request. The correspondent bank must exercise caution and due diligence when dealing with the bank. The correspondent bank must have the trust of the owner of the nested account because they essentially service customers they do not know.

A nested cryptocurrency exchange is what, exactly?

What are the risks of nesting?

The risk of money laundering is one of the main issues with conventional finance. The correspondent bank only transacts with the underlying responder bank directly, therefore they are unsure of their precise counterpart. Nesting necessitates increased due diligence investigations on the underlying bank because of this. Sanctions and a blacklist may be applied to specific people or entire nations. Respondent banks may wind up aiding unlawful operations like money laundering or sanction avoidance if an underlying bank disregards these rules.
Because the crypto sector is still creating strong laws, nested exchanges can operate more covertly. Unbeknownst to the big crypto exchange, a nested exchange may open an account with them.

What risks do stacked cryptocurrency exchanges pose?

Using a stacked cryptocurrency exchange hurts all exchanges, not just centralized ones. Additionally, you and your money are in danger for a number of reasons:

  1. Compared to a licensed exchange, your deposits have fewer guarantees about their safekeeping.
  2. You can be contributing to unlawful operations that finance terrorists and crime.
  3. The exchange could be shut down by regulatory authorities, costing you your cryptocurrency and other funds.
  4. If you knowingly cooperate with an exchange that is associated with illegal activities, you risk legal ramifications from law authorities.
    Avoiding nested crypto exchanges is the easiest method to prevent this. Because they aren't always easy to see, finding them might be challenging. For the best opportunity to defend yourself, use the advice we'll provide below.

What distinguishes a decentralized exchange from a nested exchange?

The incident involving the Suex nested exchange

Let's examine a situation from the real world. The Czech Republic-based and Russian-based Suex cryptocurrency exchange was sanctioned by the Office of Foreign Assets Control (OFAC) on September 21, 2021. In order to assist its consumers, Suex OTC offered a nested cryptocurrency trading service using major exchanges. Suex conducted in-person cash trades for cryptocurrencies while offering little to no KYC.

How can I tell if an exchange is nested?

In general, nested exchanges won't make their nested status evident. In order to identify a nested exchange and keep you and your money secure, the following information is a good place to start:
2. The location of trade is not made evident by the user interface.

  1. The exchange is not explicitly stated to be facilitating trading. Trading occurs directly through an exchange's platform, not through nested accounts, according to a legal exchange's statement.
  2. The exchange aggregates many rates from which you can select. This indicates that the exchange makes use of nested accounts for various exchanges.

Final Thoughts

Metavest protects your digital assets with MPC-based wallet providers. We also secure your account with SSL encryption, KYC processes, 2FA, and Authenticator Apps. This way, you can focus on your investments while we "hodl" the door for you.

Latest Releases