When we say “Cryptocurrency Exchanges Function”, we mean that these platforms are places where digital assets (cryptocurrencies) are bought, sold, or exchanged. The primary function of an exchange is to provide liquidity, price discovery, and services to users such as wallets, order books, custody, and occasionally derivatives trading. According to research reports, the global 24-hour trading volume of crypto exchanges is approximately $2.58 trillion.

However this shows that you cannot determine a “successful” or “best” exchange by looking at volume alone. I always look at: Does the platform publish proof of reserves? Is its custody model transparent? And are user funds kept separate? For example, a 2025 report stated that “exchange trading volume reached $9.36 trillion in H1 2025 – the highest since 2021.”

The role of regulation, transparency, and risk management

A major challenge for cryptocurrency exchanges is the regulatory framework, especially since they operate globally, and each country’s legal landscape is different. Take Pakistan for example: The State Bank of Pakistan issued a statement in 2018 not to declare virtual currencies as legal tender.

Then in 2025, the Pakistan Virtual Assets Regulatory Authority (PVARA) was created to introduce a licensing system for virtual asset service providers in Pakistan.

If you’re choosing an exchange, always check which country it’s regulated in, what type of licensing it has, and whether it follows anti-money laundering (AML) or know-your-customer (KYC) laws. Exchanges that have worked on transparency are usually a better choice for low-risk users.

Furthermore, along with volume, liquidity, custody infrastructure, and insurance against accidental losses or hacking are also important. As a clear example, just five exchanges handled nearly 68% of black market cashouts in 2022, making it clear that a few platforms were under greater pressure from illicit activity.

Practical Metrics and Analytics

Here I present some modern and verifiable metrics to help you understand the important aspect of “Cryptocurrency Exchanges Function”.

As mentioned earlier, the exchange trading volume reached $9.36 trillion in the first half of 2025, the highest since 2021.

In terms of centralized spot exchanges, Binance has about 39.8% market share, while other major exchanges have reduced their relative share.

Decentralized exchanges (DEXs) recorded a volume of about $268 billion in March 2024, proving that these platforms are growing rapidly.

According to the report, Pakistan did not yet have a complete legal framework, until the establishment of PVARA.

In light of these metrics, my advice is that when you choose an exchange, do not look only at volume but also consider risk management, level of regulation, technical infrastructure, and custody responsibility.

As a financial analyst, my experience is that there are a few key precautions to take when using crypto exchanges:

First, always enable “two-factor authentication (2FA)” on your account, and back up your personal private keys. Second, if you are depositing large amounts of money, be sure to check whether the exchange is licensed, and whether it has issued a proof of reserves or custody audit report. Since 2025, some exchanges have increased transparency, such as publishing proof of reserves.

Third, when leverage services are available in the market, look at their risks very carefully I have seen many professional investors who have suffered early losses due to the use of leverage.

And yes, always remember where there is opportunity in the crypto market, there is also risk. If an exchange does not provide proper custody support without being hacked, or lacks regulation, it can be dangerous. In Pakistan, where the legal framework is not yet complete, users should be more cautious.

If you want to know how “Cryptocurrency Exchanges Function”, it depends on Liquidity + Responsible Custody + Transparent Regulation. Volume is important, but volume alone is not enough. You need to look at how the exchange has managed risk, what the custody model, and how it is dealing with regulation. I have provided real data, global and local regulatory examples, and implementation tips in this article so that you can make your decisions in an informed manner. If you want, I can also prepare a case study or exchange selection guide specific to Pakistan for this article.

Iqra Zahoor

Financial Analyst Iqra Zahoor provides data-driven crypto analysis & strategies. Guiding you from market trends to informed investment decisions.