Safest Cryptocurrency Exchanges In 2021
You’ve heard the stories. Someone hacks into a cryptocurrency exchange and steals all their Bitcoin, or someone loses their Ledger password and can’t get their crypto back. How much crypto do YOU have? If it’s worth more than you can afford to lose, you should start worrying about security. The Mt. Gox hack in 2014 and the Coincheck exchange hack in 2018 are just a few of the infamous attacks illustrating how crypto exchanges can pose a threat to your crypto.
Not all exchanges are created equal – some are safer than others. That’s why we explored the safest cryptocurrency exchanges today, so you’ll sleep at night knowing your valuable crypto is protected.
How To Choose A Secure Crypto Exchange
When choosing the safest crypto exchange, you might be tempted to go with the first result for “best crypto exchanges” on Google. However, low fees and a host of supported crypto assets would mean nothing if your crypto exchange isn’t secure.
Understand How Cryptocurrency Exchanges Store their Crypto
Crypto wallets can be of two kinds – custodial and self-custody. The latter hands the responsibility of the wallet to you; the user. Crypto exchanges are custodial wallets where you entrust a third party to control your private key. This means that exchanges act much like banks, holding your crypto for you.
The expression “not your keys, not your Bitcoin”? is scarily true. That’s because your crypto is safe as long as the exchange holding your private keys can safeguard it. Take the Bitfinex hack of August 2016 as an example, where 1,19,754 bitcoins worth $4.5 billion were stolen. To protect against attacks like this, crypto exchanges typically use offline “cold storages” to keep the majority of their funds secure from online threats.
Consider Their Reputation And Past Hacks
Crypto exchanges manage trade assets worth several billion dollars every month. Thus, data breaches and hacks into online cryptocurrency wallets are a genuine threat.
Mt. Gox is an example of the worst-case scenario. A Tokyo-based centralized crypto exchange between 2010 and 2014, Mt. Gox was responsible for 70% of Bitcoin transactions. Mt. Gox suspended all activities in February 2014 after discovering that it had lost more than 850,000 bitcoins. Being able to locate only 200,000 of the total Bitcoins, Mt Gox was pushed towards bankruptcy after a loss of over $450 million. And Mt Gox isn’t the only crypto exchange that got hacked.
The alternative to this is taking custody of your own crypto. You can choose a type of wallet that suits you, and manage your own private keys. But this poses its own share of problems. And you’re likely to doxx yourself if you’re not careful.
If an exchange you are considering has gotten hacked in the past, see how they dealt with it and what they did to prevent more attacks.
Security Measures to Look For in a Crypto Exchange
One of the most important first steps is to find out if the exchange you’re considering offers insurance. Crypto exchange platforms need to be prepared if their reserves get hacked, during which an insurance fund can return some, if not all, of the lost funds. For example, Coinbase is insured for $255 million, and can return that much to its users if it were to be hacked.
So find out your preferred exchange’s insurance policy, and stay updated for any changes. Sometimes policies change over time, so you don’t want to be caught off-guard.
Independent security audits carried out by ethical hackers (termed bug bounty programs) are used by several centralized crypto exchanges. For a reward, these hackers find vulnerabilities in the system that could have been exploited by malicious hackers.
Instead of simply using Two-Factor Authentication (2FA), many exchanges (like Binance) allow you to set up multiple verification steps. This safeguards your own account against 2FA abuse and loopholes.
Finally, the very country you reside in is a significant factor that dictates your choice of a crypto exchange platform. Bitcoin, Ethereum, Dogecoin, and many others have been under the scrutiny of various government authorities.
Before committing to any investment, crypto traders have to be wary of the risks involved regarding government jurisdiction and laws regarding crypto investing. In China, Bitcoin and all crypto trading are completely banned. Several other countries are also planning to bring stringent regulations, such as India, which has the largest number of crypto holders (over 100 million).
Customer Service And User Experience
A 24/7 live chat support ensures that you’ll be able to resolve queries and issues you encounter ASAP. No one wants to watch their money disappear and not be able to contact someone to help.
If lengthy, detailed articles on the internet fail to win your trust, verified users are the next best thing you can fall back on. In the case of Uphold, for example, the number of satisfied users is almost the same as the ones angry about its service! Traders who have had personal experience with the crypto exchange are excellent sources of unbiased information.
Top 7 Safest Crypto Exchanges That Store Your Crypto Securely
In case you’re in a hurry, here’s a quick run-down of the features of all the crypto exchanges mentioned here:
|Company||Currencies||Security||Fees||Have They Been Hacked?|
|Kraken||87||2FA, platform security, OpenPGP, bug bounty program||0.26% – 0.16% taker-maker fees, 3.75% bank card, 1.5%-0.9% for stablecoins||No|
|Gemini||51||Cold storage, FDIC insured, FIPS 140-2 level 3 rating||$0.99-$2.99 for under $200, 1.49% for greater than $200||No|
|Coinbase||96||Cold storage, FDIC insured, AES-256 encrypted data, 2FA||0.50%, 3.99% for credit card purchases, 1.49% for Coinbase wallet or bank account purchases||Yes; 6,000 users lost all their funds in 2021 but were reimbursed|
|FTX||270||2FA, Chainanalysis KYT integration||0.04% – 0.40% taker-maker fees||No|
|Binance||200||2FA, U2F, SAFU insurance, bug bounty program||0.015% to 0.10% purchase and trading fees, 3.5% or $10 for debit cards||Yes; 7,000 Bitcoins were stolen in 2019. Users were completely reimbursed.|
|Crypto.com||200||2FA, FDIC insurance on US dollars||0.4% (no CRO), 0.04% – 0.1% maker-taker||Yes; $15 million worth of funds were stolen in January 2022.|
|KuCoin||600||2FA, additional password for trading, Onchain Custodian, insured by Lockton||0.0125%-0.1% maker/taker tiered fee model||Yes; $281 million was stolen in 2020. The exchange paid back its customers.|
We’ve chosen to prioritize the safest crypto exchanges over the best crypto exchanges simply because nothing matters more than the security of your assets. Cryptocurrency’s global market cap is now over 2 trillion dollars, with trades going up to a billion dollars.
A crypto exchange platform with low fees supporting Bitcoin, Ethereum, Litecoin, and a host of other cryptocurrencies doesn’t mean much if they aren’t secure from hackers.
Here are the seven safest crypto exchanges:
One of the oldest crypto exchanges (founded in 2011), Kraken offers spot trading, margin trading, and futures trading services for trade strategists, but it also ensures that beginners are not left behind. Kraken supports over 87 popular altcoins on its platform.
Kraken takes security very seriously. Its #2 ranking on CER.live, which ranks crypto exchanges on cybersecurity, speaks for itself. And it has never been hacked.
Kraken stores 95% of its funds in cold storage in different locations worldwide. What sets Kraken apart is its promise of platform security. The storage locations are under 24/7 surveillance and have armed guards. There is 2FA in place, supported by Google Authenticator and Yubikey, PGP email encryption, and SSL encryption when browsing their official site.
Kraken assures that all of their sensitive data is encrypted, and code deployment is carried out only after intensive review. They employ a robust bug bounty program and test their security by subjecting their framework to every known attack or exploit.
Kraken does incur a higher trading fee if you aren’t using Kraken Pro, which means you have to upgrade to a premium account if you wish to trade in higher volumes. More concerning is that Kraken has many user complaints that have allegedly gone unresolved with less-than-satisfactory customer service. However, Kraken distinguishes itself by being among the few crypto exchanges that have never been hacked.
Gemini has quickly made a name for itself as one of the safest and best crypto exchanges in the market. Gemini promises its investors that security has always been their priority. It ranks #8 on the CER site, and has never been hacked (since being founded in 2014).
Gemini is one of the few crypto exchange platforms to have FDIC insurance for US dollars in your account, for up to $250,000 per individual. You can choose to store your crypto in offline, air-gapped cold storage (Gemini Custody), and use a hot wallet (Gemini Wallet) for your regular trading activities.
With that said, the insurance they provide does not cover losses due to unauthorized access to your account – you have to ensure your account information remains safe.
The encryption for Gemini’s cold storage and hot wallet has achieved a FIPS 140-2 Level 3 rating, making them the most secure choice out there. It supports a multi-step authentication system through hardware security keys (including WebAuthn) for optimum security.
Gemini is the first cryptocurrency exchange to be compliant with SOC 1 Type 1 and SOC 2 Type 1 and 2, which means they’re well-regulated and audited routinely. Gemini supports over 50 cryptocurrencies including, Bitcoin, Ethereum, Litecoin, Dogecoin, Bitcoin Cash, and many more.
All that security comes at a price. Gemini has a higher transaction fee when compared to most crypto exchanges in the market and might be best suited for more advanced traders. If you’re not looking to trade large volumes with security, Gemini might end up being too expensive for you.
Coinbase is up there with Gemini in terms of security. It’s also one of the few crypto exchanges listed on the NASDAQ. Their #7 rank on the CER site and its NASDAQ listing mean more investment, and thus more emphasis on security for its investors.
Backed by FDIC insurance for $250,000 for every verified account, approximately 98% of the total user funds are stored offline in cold storage.
Their data is AES-256 encrypted and stored in hard drives and paper wallets in geographically safe locations inside vaults worldwide. Even if somebody were to gain access, it’s near-impossible to crack their encryption.
Coinbase employs a robust bug bounty program as well, with payouts of $250,000 to security researchers in the past.
Aside from two-factor authentication, Coinbase also provides biometric fingerprint technology for private keys. Coinbase Wallet comes in the form of a mobile app that is decentralized, so it’s self-custodial.
Their 2FA works with a security key or an OTP through Duo or Google Authenticator. The user interface is highly intuitive – perfect for crypto day traders. Coinbase supports over 80 cryptocurrencies, including their own stable coin, the USD Coin (USDC), which is pegged against the US dollar.
Like Gemini, Coinbase is a regulated crypto exchange registered as a Money Services Business under FinCEN. This means that it complies with stringent regulations regarding the security of funds.
Coinbase’s fee structure can prove to be confusing, with varying schemes of transaction fees for a basic Coinbase account. A Coinbase Pro account may be more viable with its straightforward payment scheme, trading history patterns for market data, streamlined Bitcoin trading, and cross-crypto trading, but it isn’t very suitable for beginners.
Between March and May 2021, around 6,000 users had their accounts hacked into and their funds were stolen. The hackers got in by abusing Coinbase’s 2FA system. However, Coinbase has helped its users tighten the security for their accounts and also reimbursed the lost funds. So it’s still a secure option, especially for US-based users.
FTX is one of the top cryptocurrency exchanges in terms of supported cryptocurrencies. With its headquarters in Hong Kong, FTX is a diverse crypto exchange that’s perfect for crypto traders outside the US with its low fees.
The support of over 270 cryptocurrencies and 10 fiat currencies means that it’s easy to diversify your crypto portfolio while staying secure. It even has a mobile app called FTX Pro, where you can auction or purchase NFTs.
FTX also implements interest accounts, whereby you can earn up to 8% interest when you choose to stake your crypto with them. Plus, they offer fee-free withdrawals if you stake their FTX token, which can save you a lot of money in the long run. They stand at #20 on the CER site.
FTX comes with all the industry-standard safety procedures. However, they have their unique way of implementing it. FTX is relatively new (founded in 2019), but they haven’t been hacked yet so they have a strong reputation.
When you create a new password, FTX registration ensures that it is unique and has no discernible pattern that could be hacked. There is a mandatory 2FA requirement for any transaction on an FTX account. It even goes as far as to employ a separate 2FA and password for withdrawals, effectively giving you a dual layer of security.
Beyond this, FTX pushes the security further by keeping a close eye on large transactions using Chainanalysis Know Your Transaction (KYT). This helps protect you against unauthorized withdrawals. FTX also reviews suspicious deposits/withdrawals manually.
FTX is a fantastic choice for non-US residents only, as it is restricted in the United States. There is an alternate platform called FTX.US for the US, but the withdrawal fee is steep ($75 for any withdrawal less than $10,000!), and there are fewer cryptocurrencies available.
Being the largest cryptocurrency exchange globally by trade volume, Binance comes with a vast arsenal of tools and services for a crypto trader. Even though the learning curve is steep for beginner and advanced traders alike, trading options such as spot trading and margin trading with over 500% gains can indeed be quite enticing.
Its support for over 200 cryptocurrencies and low trading fees make it a lucrative platform for all crypto traders. Binance is ranked #6 on the CER site.
Binance recommends setting up a 2FA system when a user creates an account. Binance’s 2FA can either come in an SMS or Google Authentication. For safety’s sake, I suggest using the latter, as SMS verification can be spoofed.
Trust Wallet is Binance’s official mobile crypto wallet (along with Binance Wallet for desktop users). If you’d like to go further beyond 2FA, Binance is also compatible with Universal 2nd Factor (U2F) Authentication. U2F is a piece of hardware that acts like 2FA, which means that accessing your crypto exchange account is only possible by connecting this device. Binance comes with its own insurance fund called SAFU (Secure Asset Fund For Users).
Similar to FTX, Binance is not the best option for US citizens as it offers a different site in the US. The amount of cryptocurrencies on Binance.US is severely limited, and it is allowed in only 43 states. Also, the multiple user interfaces for each type of trade might prove daunting to beginners just starting in cryptocurrency trading.
Binance’s reputation took a hit when hackers attacked Binance in 2019 and stole over 7000 Bitcoin (about $40 million). However, they have improved their security since then and all stolen funds were returned to the users through SAFU, so it’s still a relatively secure option.
With a selection of over 200 cryptocurrencies, Crypto.com is a relatively new platform that has been growing in popularity. Crypto.com is perfect for advanced traders, with low fees and several trading options to choose from. They’re ranked #1 on the CER site.
Crypto.com employs mandatory whitelisting of any external wallet addresses. They take it seriously and will not complete your withdrawal if your address is not whitelisted first.
Like most reputable cryptocurrency exchanges, Crypto.com has 2FA to secure your account, with the majority of its funds stored in offline, air-gapped cold storage. All USA users get FDIC insurance from local banks for $250,000.
Crypto.com uses the HackerOne system for its bug bounty program, and regularly patches any vulnerabilities to the system.
The aforementioned low fees come at a price, quite literally. You have to stake a certain amount of CRO, which is Crypto.com’s native currency, to get the discounted fees. They have several tiers based on how much CRO you stake. Users have also expressed concerns over how they handle customer service, with most users rating it as poor.
Additionally, Crypto.com was hacked in January 2022. The hackers stole funds worth $30 million dollars from the users. To make it worse, Crypto.com has downplayed the severity of the hack. However, they did reimburse all the affected users.
Another great option for seasoned crypto traders, KuCoin’s host of features and low fees is best suited for people living outside the US. Its support of almost 600 cryptocurrencies which includes exclusive altcoins and margin trading makes it a viable choice for international residents.
US residents will have a hard time trading here as it’s not licensed to operate there. KuCoin is ranked #29 on the CER site.
KuCoin is a decentralized trading platform that has partnered with a company called Onchain Custodian to secure its assets. Even though it is an unregulated crypto exchange, KuCoin offers bank-level security of its crypto assets as it is insured by Lockton against hacks. KuCoin employs an industry-standard bug bounty program to spot vulnerabilities.
The security measures set in place for users certainly go a step beyond most crypto exchanges. Aside from the standard 2FA, KuCoin allows you to set up an additional password aside from your login credentials before you can start trading. KuCoin can also send safety phrases to your email in order to avoid phishing attacks.
KuCoin keeps a majority of its assets in cold storage, though the exact ratio is not publicly mentioned.
Even with the security features, KuCoin was hacked by a North Korean hacking group in 2020. The hackers managed to steal $281 million worth of crypto assets. However, KuCoin owned up to it immediately and reimbursed all the user funds through insurance.
Should You Keep Your Crypto On An Exchange?
While we can’t answer that for you, here are some factors to keep in mind before you make a decision.
- Arguably the safest way of storing crypto is in the form of a cold wallet, as offline hardware is near-impossible to hack into. If you have a large amount of crypto to be stored without use for several years, a hardware wallet like Trezor or Ledger is likely your best bet. Consider it your own savings account, but you’ll also be responsible for its security with no insurance. It might even get lost in a garbage dump!
- Even with an exchange’s insurance, you never know how much they’ll reimburse you after a hack, if at all. It might shut down completely and you may lose all your stored crypto.
- Country regulations on exchanges vary from time to time, with some governments cracking down even on big exchanges like Binance. In these cases, shifting your crypto to another exchange quickly may not be easy.
With all these things to keep in mind, a tiered-wallet system may be the best solution for you. It allows you to use exchanges for your regular trading activities, but keep enough of your savings aside securely for the future, and have an inheritance plan in place as well.
Other Ways To Get Your Hands On Some Crypto Without Using An Exchange
A cryptocurrency exchange is the most popular method to buy, trade, and invest in crypto. This is not to say that it is the only way. If you’re in a place that does not allow crypto exchange legally, or you simply don’t wish to use one, here are a few ways you can still buy some crypto:
- Traditional brokerage
Although not all mainstream traditional brokerages have cryptocurrency support, you can still use outlets such as Robinhood and TradeStation, which offer to buy and sell Bitcoin and other digital currencies for no fees at all. However, the problem with Robinhood is that you cannot withdraw your crypto to another exchange or wallet – you can only sell it back to Robinhood (which may defeat the very point of DeFi).
- Bitcoin ATMs
In the US, you have a choice between 5,840 Bitcoin ATMs. An easy way to track them is through an app called BTC CoinATMRadar. Like regular ATMs, Bitcoin ATMs move currency in and out of a digital wallet, and you can easily use fiat currency like cash or a card.
- Do-It-All Digital Wallet
A digital wallet is an encrypted location where you can store your cryptocurrency, with your own keys. Compared to that, a do-it-all digital wallet allows you to buy Bitcoin with a charge card. Atomic Wallet and Exodus are two of the most popular options here.
What is cold storage?
Similar to the concept of a cold (offline) wallet, cold storages store most of the funds belonging to the exchange in offline devices, isolated from any kind of public access. These physical locations are confidential and are sometimes heavily guarded.
The offline nature of these storages lends to it an added layer of security and complexity, as the only way to access the funds in cold storage is via manual authentication. Hacking into cold storage is near impossible.
What’s the difference between centralized and decentralized exchanges?
When you use a centralized crypto exchange, you’re entrusting a third party to store your crypto and monitor your transactions. Most centralized exchanges require you to submit your personal information, which depends on the type of KYC (Know Your Customer) system they have in place.
A decentralized cryptocurrency exchange differs by not having a third party to rely on – you still control your crypto. All funds in this exchange are stored and recorded on the blockchain. It adheres to the original vision of Bitcoin – a decentralized financial system (DeFi). Decentralized exchange platforms work via peer-to-peer (P2P) trading.