Even though it has faced some setbacks recently, cryptocurrency is still a very sought-after investment for many people. Out of the top Google searches for 2022, Bitcoin was Googled more than TikTok, Apple, and NFL.
The world of cryptocurrency is constantly changing, and with new exchanges popping up all the time, it can be hard to know which ones are worth your money. This article will explain what makes a cryptocurrency exchange secure and what to look for when choosing your platform. In addition, we’ll list the five most secure crypto exchanges of 2022, according to our research.
What makes a crypto exchange secure?
One of the most essential factors in determining whether a cryptocurrency exchange can be considered secure is its compliance with local government regulations.
A well-regarded platform will have been vetted by state-level financial regulators and held to local standards for ensuring user trust. However, the regulations vary from very strict to practically absent, depending on the country.
For example, in the United States, cryptocurrency exchanges are subject to the Bank Secrecy Act (BSA). That means that all cryptocurrency exchange service providers must register with FinCEN, implement an AML/CFT program, keep adequate records, and provide reports to the authorities.
In October 2020, the introduction of new compliance responsibilities for cryptocurrency exchanges was signalled by FinCEN releasing a Notice of Proposed Rulemaking (NPRM) on adjustments to the previous “Travel Rule.”
In December 2020, FinCEN proposed a new cryptocurrency regulation requiring data collection from cryptocurrency exchanges and wallets. The rule is planned to go into effect at the end of 2022 and would make exchanges submit suspicious activity reports (SARs) for transactions worth more than $10,000. Also, wallet owners would have to identify themselves when sending over $3,000 in a single transaction. So, the crypto ‘wild west’ is coming to an end.
Another interesting example would be the UK, where until recently, there were barely any cryptocurrency-specific laws. The UK viewed cryptocurrency as property and not legal tender, so crypto exchanges had to register with the Financial Conduct Authority (FCA). The Office of Financial Sanctions Implementation (OFSI) updated its compliance requirements for crypto exchanges and custodian wallet providers in August 2022.
About the cryptocurrency exchange regulations in other countries, you can read here.
Overall, regulatory compliance can be seen as a major indicator of whether or not an exchange can be trusted, helping users to feel confident about their assets. Those platforms that comply with the state regulations usually incorporate additional protective measures, which we will cover in the next section of this article.
The following anti-hacking approaches are used by most well-known cryptocurrency exchanges, often in combination:
The most popular method is two-factor authentication: a user must input a one-time password for each purchase, which is sent to their phone or email. Two-factor authentication is an extra layer of security that can make it much harder for hackers to access your account.
The second most popular protection method is multi-signature, which refers to a wallet with multiple keys that different people own. To access the funds, all electronic signatures must be collected. However, this system is not fail-safe. One of its primary weaknesses lies in the fact that it only works if all signers are independent of one another.
Distribution of funds
One of the best ways to stop hacker attacks is by spreading assets between hot and cold wallets. In addition to physical security measures (like cameras and guards), a cold wallet can have multiple signatures, making it much more secure. The more value the exchange has in a cold wallet, the safer it is.
Another type of exchange protection is called a Bitcoin lock, a special kind of Bitcoin address where two security keys lock coins. With this system, you need the first key to unlock and access the funds immediately. But if you want full control over the money, you must wait 24 hours before using the second key. Also, any transaction can be cancelled during that waiting period by entering the second key. If someone hacks both keys, there’s another level of protection: the exchange can delete all the funds stored in that wallet.
Top-5 Secure Crypto Exchanges in 2022
Kraken is known for its security, with its 2-factor authentication and PGP/GPG encryption, making it a very safe place to trade cryptocurrencies. It also offers more than 150 coins and tokens. Kraken is an excellent choice for those looking for a reliable and secure exchange.
- Some of the more sophisticated features available on Kraken Pro include margin trading and staking.
- Good customer service options are also available, including a chatbot and phone support.
- Bitcoin (BTC) withdrawal fees are relatively low.
- Kraken publishes a wide range of educational material on cryptocurrency.
- Only available to U.S. residents and only in some states.
- Only selected fiat currencies.
Coinbase is another well-known cryptocurrency exchange, founded in 2012. Coinbase is known for its user-friendly interface and ease of use. It is one of the most popular exchanges, with over 56 million users. Coinbase offers a variety of coins and tokens, including Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and many more. For beginners looking for a simple and easy-to-use exchange, Coinbase is an excellent choice.
- User-friendly interface and extremely smooth purchasing flow
- Strong user reviews and great security
- Simple staking.
- Pretty costly
- Not available in all 50 states of the US.
Binance is a ‘newer’ cryptocurrency exchange founded in 2017. Binance is one of the largest exchanges, with over 30 million users. It offers a variety of coins and tokens, many Defi options, and NFT support. Binance is a great choice for those looking for a reliable and secure exchange with a large selection of coins and features.
- The sign-up process is quick and easy.
- Credit and debit card support.
- Free deposits.
- Super-fast transactions.
- Various on-site staking options.
- High withdrawal fees.
- The exchange has been hacked previously.
- Less regulated than some competitors.
XBO.com is a secure crypto exchange founded in 2020. XBO.com is one of the most user-friendly exchanges out there with an instant swap feature (fiat to crypto, crypto to crypto, or crypto to fiat). Apart from that, XBO.com offers different loyalty tiers, allowing you to earn cashback from your crypto swaps up to 1%.
XBO.com is an excellent choice for those looking for a reliable and secure exchange with an easy-to-use interface.
- Minimalistic design
- Highest security standards
- Apps both for iOS and Android
- Great customer service
- Relatively new platform
- Not available in all countries
Gemini is a well-known cryptocurrency exchange. It was founded in 2015, headquartered in New York, NY. Gemini’s easy-to-use interface makes it the best crypto exchange for beginners. Although the platform charges slightly higher fees, this is a fair tradeoff for its convenience and user-friendliness.
- Straightforward, easy-to-use interface.
- Top-notch security, integrated hot wallet.
- Tons of educational materials for beginners.
- Relatively high fees.
- Not available worldwide.
- Known complaints about customer service.