Whether you already own digital assets or are thinking of making 2023 the year that you finally invest in crypto, you’re probably concerned with security. That’s a good mindset to adopt from the beginning. The FTX meltdown proved that the safest crypto exchanges aren’t always those that are the biggest or trendiest.
Whether you’re buying coins, tokens or NFTs, exchanges are where money is converted into digital assets — and that makes them a juicy target for hackers and other criminals who want what you have.
What Is the Safest Crypto Exchange?
The good news is that many of the biggest names in the business have made great strides in securing their platforms and keeping their users’ assets safe. Here’s a look at the best of the bunch and their most critical security protocols.
With more than 108 million users, Coinbase is the largest publicly traded exchange in the world and one of the largest, period. The U.S.-based company keeps 99% of its users’ digital assets offline in cold storage and uses mandatory, auto-enrolled two-factor authentication. Security key support, password protection and multi-approval withdrawals in Coinbase Vault are all built into the Coinbase security guidelines.
All passwords are stored in the exchange’s database and are irreversibly hashed using the bcrypt algorithm. Coinbase monitors third-party data breaches and darknet markets for threat indicators and the exchange never lends or takes any other action with your assets without your permission.
Gemini consistently ranks at or near the top of industry lists that profile the most secure exchanges. The Winklevoss twins of early Facebook fame founded Gemini and placed an early focus on compliance and security. By default, the company requires two-factor authentication for account access and withdrawals — it also supports Yubikey and other security keys.
Gemini supports address allowlisting so users can restrict asset withdrawals to allowlisted addresses. The exchange stores all private keys off-site at high-security data centers and requires multiple signatories to transfer assets out of its Cold Storage System.
Kraken is known as one of the most secure international exchanges, and its approach to cybersecurity and information management security earned it a coveted ISO/IEC 27001:2013 certification. It schedules regular proof of reserve audits through outside auditors, and its custody security protocols include advanced cold storage and crypto infrastructure that exists in secure cages under video surveillance and 24/7 watch by armed guards.
Other security features include no-phone/SMS account recovery, two-factor authentication, SSL encryption and customizable API key permissions with range boundaries.
Crypto.com bills itself as “the world’s leading cryptocurrency platform for licenses, registrations, and security certifications.”
Its security strategy is based on a zero-trust, defense-in-depth protocol — 100% of its customers’ crypto assets are stored offline in cold storage and all user fiat currency is stored in custodian bank accounts. It holds all deposited assets on a 1:1 basis, and users can verify the exchange’s reserves through Crypto.com’s Proof of Reserves verification page.
eToro users can buy not just crypto, but stocks, ETFs, options and commodities. One of the oldest exchanges in the industry, it has registered users in more than 100 countries. It follows security standards set by several different international regulatory agencies, including those from the U.S., U.K., Australia and the E.U.
Its multi-tiered approach to keeping digital assets safe includes online warm storage and offline cold storage. eToro forbids all employees from transferring crypto out of its cold storage system.
Which Crypto Exchange Is the Safest?
If the crypto world learned anything from the implosion of FTX, it’s that security goes beyond just digital encryption and protection against hackers, malware and other external threats. Corporate mismanagement and malfeasance from within can be equally destructive or worse.
The FTX collapse revealed glaring red flags that even a mildly competent auditor would have recognized immediately.
But Coinbase is not inspected by a mildly competent auditor — and that’s one of the reasons that it’s the safest exchange. Coinbase is audited annually by Deloitte, one of the so-called Big Four accounting firms, the most prestigious in the country and the world — and they’re notoriously selective about who they’ll take on as clients.
For example, BeInCrypto reported at the end of last year that all of the Big Four — Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers — refused to audit Binance. Binance is not alone. According to Seeking Alpha, Coinbase is the only exchange that’s audited by a Big Four firm.
What Is the Safest Crypto Exchange in the US?
The top exchanges all have excellent security bona fides, but Coinbase earns the top spot among U.S.-based exchanges, because it has another thing going for it that all of the others do not.
Coinbase was the first and remains the country’s only publicly traded cryptocurrency exchange. That subjects it to the intense scrutiny of the SEC and the strict rules and regulations that govern all publicly traded companies listed on the NASDAQ.
What Is the Most Reliable Crypto Platform?
Reliability and security are two different metrics, and all of the previously mentioned exchanges are known for reliability as much as security.
When looking for a reliable exchange, consider factors like the number and variety of coins they support, fees, liquidity, ease of use, where they operate, tech support and deposit and withdrawal limits.
Even the most secure exchanges are vulnerable. No matter which you choose, the safest bet is to keep your coins on any exchange only for as long as is necessary to complete a transaction. Don’t hold your coins in an exchange-provided custodial hot wallet. Instead, keep them in a software wallet or, better yet, a cold-storage hardware wallet, which is the most secure option of all.