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we are planing to implement a ERC-20 token with whitelisting (only whitelisted addressees, can trade tokens). And we are planing to list this token on some exchanges. Is this possible? What must be done for the exchange to work with the whitelisting:

  • Add the exchange address as whitelisted?
  • Each customer that participates on the exchange must have his exchange wallet whitelisted by our platform?

Will exchanges even list this type of token?

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It depends. Your question lacks necessary facts to to form a good opinion. Whitelisting alone is not a decision factor, but there are other contributing factors involved.

  • Are you looking to raise funding by selling this token

  • What does the token do

I would say having the whitelist on the token makes it very securities like and thus subject to different securites regulation around the world - but not necessarily alone. Most crypto exchanges do not list securities.

One character of securities is that there is an issuer who controls who are the people who can trade the token. The token owners rely on the issuer to run the system (and most likely for some speculative profit). Furthermore you would technically need to add an way for the exchanges to whitelist their own addresses.

On the othe hand, TokenMarket exchange will list your token if the issuer complies to the necessary securities regulation.

Disclaimer: I am the author of the exchange. I am also working on the same problem.

  • Thanks for the answer, the token must be regulated, and it is asset-backed token. So that makes it a security. The requirement is token transactions must be only between whitelisted addresses and the token must be listed on exchange, currently the only exchange working with security tokens is DX.echange – Dimitar Pavlov Apr 8 at 11:23
  • Cool. Then you can TokenMarket security token smart contract code and exchange. – Mikko Ohtamaa Apr 9 at 9:07
  • Also when you are doing it in a legit manner, then it is much easier, as you can focus only on exchanges that do security tokens. – Mikko Ohtamaa Apr 9 at 9:10
  • If you have any further questions please feel free to pop in our Gitter chat: gitter.im/security-token/Lobby – Mikko Ohtamaa Apr 9 at 9:14
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Technically, in order to list your tokens exchange need to be able to do the following:

  1. Receive token deposits from users
  2. Hold token reserves
  3. Reorganize token reserves, i.e. move tokens between hot/cold/multisig wallets the exchange use to keep reserves secure
  4. Send token withdrawals to users

First item requires you to whitelist addresses exchange uses to receive deposits form its users. Different exchanges may use different schemas for receiving token deposits. In some schemas exchange may create separate deposit address for every user. Adding all such addresses to whilelist may be both time consuming and expensive. So, you may probably have to convince exchange to use deposit receiving schema that does not require too many addresses to be whitelisted.

Second and third item are very exchange-specific. You will need to agree with exchange how you will whitelist addresses used internally by exchange, or even allow exchange to whilelist its addresses by itself.

Fourth item is relevant only when user wants to withdraw your tokens. In case user just trades them on exchange, it is not necessary to whilelist him. Though exchange should probably be able to check, whether withdrawal address provided by user is whitelisted or not, and deny withdrawals for non-whitelisted users.

Anyway, listing such token on exchange will require some negotiations between you and exchange, and most probably some development work on exchange side. So exchange should probably have really good motivation to list your token.

  • Please note that this problems concern centralised exchanges only. For decentralised exchanges, it is enough to whitelist a single Exchange contract address. Custodians, like broker dealers, can register whitelist their cold multisig wallets by doing a transaction through the multisig wallet. – Mikko Ohtamaa Apr 9 at 9:09
  • Any case, for each new registered address there needs to be a on-chain transaction paid by someone, assuming you keep whitelist on-chain. – Mikko Ohtamaa Apr 9 at 9:09

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