Any institution that trades cryptocurrencies is not classified as a financial institution by definition. Therefore, any exchange involved with cryptocurrencies only is not subject to financial regulation and control (much like computer games with in-game currency and economy aren't). However, I suspect if an exchange lists BTCUSD or BTCEUR then they are dealing with a currency issued and regulated by a central bank and therefore become subject to financial regulation.

Am I correct in concluding that the purpose of coins mirroring real world currency such as USD is to allow an exchange to deal purely with cryptocurrencies and avoid falling into the scope of financial regulation yet have a cryptocurrency (in this case USDT) which is tightly linked to a real world economy (US and world economy)?

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    This question has multiple flags citing it as unrelated to Bitcoin. I disagree, because the main gist of this question appears to be about cryptocurrency regulation, and whether stablecoins are an effective means to sidestep friction caused by fiat. This is a fairly general topic that does impact Bitcoin users. I have therefore voted "Leave Open". – Murch Apr 25 '20 at 23:49
  • A very good question that still has no answers – Suncatcher Nov 1 '20 at 17:18

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