Are your cryptocurrencies safe in your exchange? Here’s what experts say

Securing your cryptocurrencies: The safety of cryptocurrencies on an exchange is a critical concern for investors. While some investors choose to disconnect their crypto holdings from the internet by using hardware wallets, not everyone has the privilege of keeping their crypto locked in a hardware wallet. 

Most of the day traders choose to keep their cryptocurrencies in their exchange wallets to make them easier to access. But is your crypto exchange safe enough to trust with your hard-earned crypto portfolio? Here’s what experts opine on this critical but generally less talked about subject. 

Dhruvil Shah, SVP of Technology, Liminal Custody Solutions says, “Ensuring the security of digital assets requires a multi-faceted approach. Exchanges must implement robust encryption, two-factor authentication, and cold storage solutions. Regular security audits and transparency in reporting breaches are essential.” 

Additionally, Shah also emphasises that regulatory compliance plays a vital role in safeguarding investor interests. Shah said, “It's imperative for users to conduct due diligence before selecting an exchange and consider factors like the platform's track record, regulatory adherence, and security measures in place. In a volatile and evolving market, a cautious and informed approach is vital to safeguarding one's crypto investments.”

Choosing the right crypto exchange is critical

Edul Patel. CEO, Mudrex also shared his opinion on the matter with Republic. Patel underlined the importance of due diligence of users while choosing their crypto exchange. Patel said, “It is important for investors to conduct due diligence on the platform’s reputation, security features, insurance, and compliance.”

Patel also suggests specific features users should look out for. “Opt for platforms with robust security measures such as two-factor authentication. Diversify holdings among multiple platforms, exchanges, and wallets for added security. Staying informed about cryptocurrency news and emerging risks is essential to adapt to evolving conditions and safeguard investments effectively,” added Patel.

Also, investors should engage in trading on regulated on-shore exchanges whenever possible. This approach offers an added layer of protection, as these exchanges are accountable in their respective regions should any unforeseen circumstances arise.

Pros and Cons of storing your crypto in an exchange

Storing cryptocurrencies on a crypto exchange has its pros and cons and Rajagopal Menon, VP, WazirX, shared his list for the same with Republic. 

According to Menon, these are the prominent advantages that users can have while storing their cryptocurrencies on an exchange. 

Ease of access: Exchanges are user-friendly and make trading easier. You can quickly convert your assets or take advantage of market fluctuations.  

Liquidity: Exchanges offer high liquidity, allowing you to move large volumes of assets quickly.

Security: Reputable exchanges invest in security measures like cold storage and two-factor authentication (2FA) to protect user assets.

However, Menon also cited one of the major cons of storing your crypto with the exchange. He said, “Storing your assets on an exchange means you're not the sole custodian of your private keys. This centralization is contrary to the ethos of decentralisation in the crypto world.”