Online Currency Exchange

Reviewed by Sujaini | Updated on Aug 27, 2020

What is an Online Currency Exchange?

Online currency exchange is an internet-based platform that aids the transfer of currencies for distribution in a stable, centralized setting between countries or companies.

Understanding Online Currency Exchange

Online currency exchange is, as implied in the term, an online system for exchanging the currency of one country for another, whether it is at governmental (inter-country) or corporate (business to business) level. It provides immediate transparency, enabling the respective parties to keep tabs on all aspects of the transaction, thereby enhancing efficiency, reducing costs, and increasing security.

Comprised of a computer network that connects banks, brokers, and traders, the online currency exchange allows currency conversion for delivery. Forex brokers also offer an exchange of currencies online as part of their platforms. The actual platform that handles the transaction will differ depending on the broker that provides it, the trader’s position and the currency pairs that traded.

Forex brokers are companies that provide access to a trading site for currency traders and a means of exchanging electronic currency. Some brokers offer the service free of charge, while others allow a payment, either as part of the spread or as a fixed price. Most brokers provide the unrestricted use of a universal converter currency.

Limitations of Online Currency Exchanges

One cannot exchange or convert the currency of every country. Some countries have monetary policies which put restrictions on their money's convertibility. Convertibility of currencies is essential for a global economy and crucial for foreign trade. A non-convertible currency poses significant barriers to both business and tourism.

Individual brokers may not handle currency exchange for a differences contract (CFD). Cash payments compensate for the delivery of the asset during settlement in a CFD futures contract agreement.

Not every broker can handle the cryptocurrencies exchange, either. A cryptocurrency is digital or virtual organic money that uses security for the Blockchain or cryptography. A central bank does not regulate the virtual currencies, and for all virtual currencies, there is no exchange for legal tender.