Most people will start their crypto journey with one of the big-name exchanges, such as Coinbase, Binance or eToro.
They’ll buy some Bitcoin, or other crypto, and let it sit in their account hoping that over time its value will increase.
But this raises a few issues, the most important being whether it’s safe to keep your crypto on an exchange long term.
After all, storing your Bitcoin this way means that you don’t hold your private keys, the exchange does.
This means that they could take control of your crypto at any point. ‘Not your keys, not your crypto’ as the saying goes.
Also, there have been numerous high-profile hacks where millions in crypto has been stolen from exchanges.
In most of these cases, outside forces have been responsible. But there have been some incidents where the finger of suspicion has pointed at the exchange’s operators.
Increasing regulation could limit access to crypto exchanges
Regulatory issues have also created concern among crypto holders.
In July 2021, a branch of Binance, one of the world’s largest crypto exchanges, was banned from operating in the UK.
Shortly afterwards, Barclays bank, Santander and Faster Payments all halted bank transfers between their clients and the exchange.
Many saw this as a huge infringement of personal freedoms, while the banks argued it was to protect customers.
They claimed to have identified certain activities that gave cause for concern, including Binance’s alleged lax approach to Anti-Money Laundering (AML) regulations and lack of designated HQ.
Either way, this move shows how far banks are prepared to go if they’re unhappy with the way a crypto firm is operating.
Therefore, it’s important to know just how secure your crypto exchange is when parting with your hard-earned cash and how easy it will be to access your coins if banks and regulators take further action.
Is my Bitcoin and crypto safe on Coinbase and Coinbase Pro?
Coinbase’s success at creating a user-friendly platform accessible to all has seen it grow into one of the largest crypto exchanges in the world. In fact, it’s even listed on the Nasdaq.
You’d assume then that it was a safe place to buy, sell and trade crypto and store your Bitcoin. And you’d be right.
According to Coinbase’s website, the company takes “extensive security measures” when it comes to keeping your account safe from nefarious actors.
Some 98% of client’s cryptocurrency is stored offline. Bitcoin and other coins are held in cold storage in safe deposit boxes at various locations around the world.
Coinbase also uses Vaults – a system that creates an additional layer of security by requiring multi-email approval and a 48-hour time delay on any crypto withdrawals.
Additionally, the company highlights the fact that all staff are required to undergo a criminal background check before they’re hired.
Coinbase is licensed to operate in multiple US states and has an E-Money License from the UK’s Financial Conduct Authority (FCA) which means they’re confirming to all the regulatory requirements.
In light of this, Coinbase is considered to be one of safest exchanges in the world and is a completely legitimate company to engage with.
Related post: Coinbase review
Is my Bitcoin and crypto safe on Binance?
Binance stands shoulder to shoulder with Coinbase as one of the largest cryptocurrency exchanges in the world.
However, the first half of 2021 saw it come under increasing scrutiny from regulators around the world for the reasons highlighted by Barclays above.
The FCA effectively banned Binance Markets Limited from operating in the UK, although this is a spin-off firm from Binance.com and was not actually providing services at the time.
Many sections of the media misreported the move as a ban on Binance un the UK, whereas the FCA had placed no restrictions on the nation’s citizens using Binance.com.
In the days that followed other countries also imposed their own restrictions on the exchange and issue warnings to clients.
These regulatory issues do raise a question mark over Binance, but the company appears to be working towards reversing the restrictions that have been imposed on it.
Binance is still considered a safe place to trade crypto and like Coinbase, holds most if its client’s funds in cold storage.
2FA is standard practise across the site and withdrawals are protected by a double level of security involving both mobile and email confirmation.
Even so, it’s good practise to move crypto your ‘hodling’ into a secure, offline wallet, as Binance has been targeted by hackers in the past.
Is my Bitcoin and crypto safe on eToro?
eToro started life 14 years ago as a stock trading platform known as RetailFX.
Having been rebranded as eToro in 2010, the company has enjoyed huge success with its accessible platform and CopyTrading feature.
It was inevitable that crypto would come next, and in 2018 it eToro entered the market by enabling users to buy a select few coins, including Bitcoin and Ethereum.
eToro takes security extremely seriously and is among the safest exchanges you can use to buy Bitcoin and other supported coins.
It is licensed and regulated by the FCA in the UK and has a registered office and operating centre in London.
Security measures such as 2FA are standard across the board and like the other exchanges we’ve mentioned here, a large portion of client’s crypto is kept in cold storage.
On chain funds are protected by multi-signature technology alongside other “security mechanisms” which eToro keeps close to its chest.
This makes it an extremely safe exchange to buy and sell crypto on, and one that’s used by millions of people every day.
Is my Bitcoin and crypto safe on Gemini?
Gemini bills itself as the most secure exchange in the world, so it’s got a lot to live up to.
And so far, it has. The US-based company owned by the Winklevoss twins (Tyler and Cameron of Facebook fame) has never been hacked since it was founded in 2014.
Aside from its US permission, in the UK the trading platform, which also doubles up as an account where you can earn interest on your crypto, has an Electronic Money Institution license from the FCA.
The security claims are also backed by Gemini’s decision to complete a SOC 2 Type 1 review carried out by auditor Deloitte & Touche LLP.
Private keys are held offsite in geographically distributed locations as part of a wide-ranging cold storage network. Gemini also uses multi-signature technology to protect client funds from attacks.
Assets are also insured by a selection of underwriters and this cover exceeds the value of crypto held in hot wallets – those that remain on the blockchain.
There’s more technical stuff as well, but from what we’ve detailed above you can tell Gemini takes security very seriously.
Again, Gemini is an extremely safe place to trade and store you Bitcoin and other cryptocurrencies making it a market leader in the crypto world.
Is my Bitcoin and other cryptocurrency safe on Kraken?
Kraken is another exchange that’s never been hacked which demonstrates how seriously they take security, given that they’ve been around since 2011.
Security measures such as 2FA are standard and, like other exchanges, Kraken uses a combination of hot and cold storage to satisfy client demands while ensuring the majority of coins are off-chain and secure.
Additionally, Kraken has been granted and FCA license to operate its platform in the UK, and has permissions in other countries around the globe, including America, Canada and Japan.
Although open to global customers, aside from a few restricted countries, San Francisco-based Kraken tends to have a US-centric following weighted towards more professional traders and institutions.
Kraken is noted for being extremely transparent when it comes to the security of its client’s assets, as demonstrated by multiple audits that show its reserves exceed client funds held on the platform.
This means that if the platform were to be hacked, there are ample funds to compensate clients for any losses they may suffer.
Kraken is another safe and secure place to trade Bitcoin and is a completely legitimate company to do business with.
Should I store my coins on an exchange or keep them in a hardware wallet offline?
No matter how secure an exchange is, you never know when someone will find a vulnerability to exploit that will enable them to steal your crypto.
Even with the majority of user funds held off-chain in secure facilities (sometimes patrolled by armed guards!), there’s always the chance that a crook will figure out a way to relieve an exchange of its coins.
Many people say that people who aren’t actively trading crypto should store their coins offline in a hardware wallet or similar, such as the ones made by Trezor.
Always bear in mind though that you’re then solely responsible for your own security. And if you lose your hardware wallet and recovery phrase (theft, fire etc) your coins are lost forever.
Pros and cons to using an exchange or hardware wallet
On an exchange if you lose your password, you can simply reset it. However, you don’t actually control your crypto – the exchange does.
There are pros and cons to both, and a lot depends on your attitude to risk and how fearful you are about your coins being swiped.
If you do choose a hardware wallet, ensure that you keep your recovery phrase well protected and store copies in different locations.
Exchanges are getting a lot safer and there are far fewer hacks (that we hear about anyway!) these days.
If you stick to one of the big-name companies than it’s highly likely you’ll enjoy a safe and problem free crypto experience.
Steps you can take to secure your Bitcoin
- Always enable 2FA if it’s not automatically implemented by an exchange.
- Store the funds you intend to keep long term offline in a hardware wallet.
- Always double check exchange URLs – bookmark safe addresses.
- Double check crypto wallet addresses when cutting and pasting.
- Research companies thoroughly before parting with your cash.
- Never click on links in emails, even if they appear to be from a legitimate exchange.
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).