Cryptocurrency statistics show that the industry grew by a whopping 900% from March 2020 to February 2021. This translated to a global increase in cryptocurrency theft of $142.3 million over the same period. During this time, several crypto exchanges across the globe were victims of hackers.
Crypto exchanges are a crucial component of the ecosystem that encompasses these digital currencies, which is why we can’t really do away with them. At the core of cryptocurrencies is blockchain technology, whose anonymity feature is a significant attraction for most investors. However, the feature is a double-edged sword since it also makes it easier for hackers to get away with cryptocurrency crimes- it’s difficult to trace them!
Whether you have invested millions in cryptocurrencies, or only a small fortune, you probably don’t want to lose it all and have nowhere to report! For this reason, finding safe and secure exchanges becomes crucial for everyone getting into the crypto scene.
Don’t know which exchange to go for? This article highlights five of the safest exchanges that you should try out. We also highlight what to look for in an exchange and include some tips to keep you extra safe when transacting on exchanges.
Let’s dive right in, shall we?
Safest Crypto Exchanges Every Crypto Enthusiast Should Try
Before we get into it, it’s worth mentioning that many other safe exchanges haven’t made it to our list. That doesn’t mean they aren’t trustworthy, but you should always do your due diligence. That said, here are our picks for the safest exchanges.
Kraken was founded in 2011, and it makes it to this list thanks to its unique, comprehensive approach to security. The exchange has a good track record, making it one of the most popular exchanges out there.
To ensure users’ safety, Kraken performs KYC checks for anyone who wants to join the platform. However, Kraken is keen on user control and account protection. Therefore, the exchange encrypts all sensitive account and user information. In the event of a breach, users can initiate a kill switch that locks the account entirely.
When it comes to cryptocurrency storage, all wallets use AES-256 encryption. Most cryptos are held in cold storage, and the only ones stored in hot wallets are those needed to keep the platform running. However, Kraken has some digital currencies in semi-cold reserve wallets for easier access. The platform also offers a bug bounty program, and its legal compliance makes it exceptionally stable.
Gemini is licensed and regulated in the US but is available in a handful of other regions, including Canada, Singapore, and the UK. Therefore, if you’re considering using this platform, you should first ensure it’s available in your region.
The exchange was founded in 2014 by the Winklevoss twins, who famously won a suit against Facebook’s Mark Zuckerberg. Like Kraken, Gemini offers some of the basic security features and even includes a bug bounty program. It also has most of the cryptos stored in cold storage.
However, one of the most impressive security measures that the exchange has taken is providing insurance. According to the platform’s developers, $200 million is held in crypto insurance coverage. The exchange also ensures the coins are in cold storage, and the platform’s users can purchase additional insurance for their cryptos.
If you have been in the crypto world for more than a minute, you have undoubtedly come across Coinbase. The platform is one of the most popular, boasting millions of users across the globe. Coinbase ticks all the ‘must-haves for a secure crypto exchange, which is probably why it has the backing of trusted investors.
Besides the 2FA, a bug bounty program, and KYC checks, the platform stores 98% of the cryptos in cold storage. Further, it is developing high-tech security features that are robust enough for institutional investors.
The platform’s stellar reputation and impressive collection of trader tools make it ideal for beginners and advanced traders. Despite the advanced technology powering the exchange, it provides a seamless onboarding experience and enough material, so novice users don’t feel overwhelmed.
Like Gemini, CEX.io is one of the few exchanges that has never been hacked. The platform offers different payment methods, including fiat to crypto transactions. As such, it is a favourite for many traders, especially those who are still learning the ropes. The exchange has its headquarters in London but has users from across the World.
CEX.io, like all other exchanges in our list, ticks off the major security features; 2FA, cold storage for the majority of the coins, and KYC checks. Further, the exchange complies with Anti-Money Laundering (AML) regulations and offers complete data encryption to keep the users’ information secure.
While all our previous mentions are significant players, it’s worth noting that some new contenders are giving these platforms a run for their money regarding security features. One such platform is NordikCoin, which is still relatively new. However, the development team behind the exchange comprises auditors, technologists, and lawyers, which helps to set it apart.
Besides the standard security measures, NordikCoin employs some innovative features. For example, the exchange goes beyond the basic KC checks by using advanced ID verification through official electronic solutions, such as BankID and MobileID. Therefore, registering for an account takes a few minutes, even with the obligatory KYC checks.
What Should I Look for When Choosing a Crypto Exchange?
Unfortunately, the industry’s rapid growth means that both enthusiasts and scammers are drawn to it. Therefore, exchanges keep cropping up by the day, with some being fraudulent right from the very start. So, how do you separate the wheat from the chaff? Here are some things you should always be on the lookout for.
A quick search on the internet could reveal a lot about an exchange you are eyeing. Before putting your money in any of them, check that they don’t have a tainted reputation. An exchange whose history is marred with numerous hacks is likely going to experience another, and you’re better off staying away from them. You can also join forums for crypto enthusiasts on multiple platforms such as Reddit and inquire about other users’ experiences.
- Jurisdiction and regulation
Because cryptocurrencies are only getting through to the general population, countries and jurisdictions have different laws to this effect. As a result, an exchange may only be available in certain regions. Ensure that your exchange of choice is available in your primary residential area to avoid any issues. Further, check that they are compliant with the regulations set in place if any.
- Security features
Of course, you have to ensure the platform has the appropriate security features. After all, the last thing you want is to lose your hard-earned money through a hack or a scam program. Most exchanges will have some basic features such as the 2 Factor Authentication (2FA) in place. However, check that the exchange takes things further and offers features such as cold storage for most cryptocurrencies and a bug bounty program.
- Verification requirements
Cryptocurrency exchanges often have different verification requirements. Some, especially those operating in areas where no laws are governing the use of cryptocurrencies, only require that you sign up and you’re good to go. While these may seem convenient, it also means that fraudulent users can get in just as easily. Therefore, going for an exchange that conducts KYC checks may be a better option for those who aren’t too keen on remaining anonymous. However, bear in mind that such exchanges are at the risk of data leaks!
- Trading fees
Finally, the trading fees charged by your crypto exchange should be a significant concern before making the first deposit. If you, especially, plan to trade quite often, a platform with exorbitant fees may end up causing you losses. Exchanges usually charge different fees, so you must check them all and compare other options before settling for one.
3 Extra Tips to Remain Safe When Trading on Exchanges
Even after verifying all that you can about an exchange, it doesn’t hurt to have a few tricks up your sleeve. Check out these three tips that you can implement to remain extra safe when transacting.
- Use a crypto wallet.
One major mistake rookies make in the crypto world is storing all their digital currencies on the exchange. Get a crypto wallet for extra safety and only have the cryptos you’re trading on the exchange. There are different types of wallets, so finding one that suits you shouldn’t be too much of a problem.
- Stay updated with crypto news.
The beauty (or curse, depending on how you look at it) of the crypto industry is that there is always so much going on. Therefore, keeping abreast of the crypto happenings and trends could save you a lot of trouble. Follow up with whatever is trending and always DYOR (do your own research). This way, it becomes even easier to spot a fraudulent exchange from miles away.
- Don’t trust anyone
The rule of thumb is, ‘always withhold your trust.’ If anyone approaches you asking for your details or documents, make a run for it. As you get deeper into trading, you will realize that platforms such as Telegram are a significant industry player. Unfortunately, these platforms are also home to scammers, so don’t give your trust easily.
Thanks to cryptocurrency exchanges, enthusiasts can buy, sell, and trade their cryptos to earn more. However, since the first major exchange hack in 2011, there have been so many others, and billions have been lost as a result. While it’s true that we can’t entirely eliminate the risk of loss, you can take certain measures to ensure your portfolio remains safe.
Therefore, be sure to use our checklist when shopping around for an exchange. If you have no idea which one to choose, any of the five that we’ve listed could be an excellent place to start.