Cryptocurrency Exchanges

Some transactions involving cryptocurrencies are done through a cryptocurrency exchange. Exchanges are accessed through a web browser or mobile application. These exchanges allow users to acquire tokens and coins by purchasing them with fiat currency or converting to/from other cryptocurrencies. Most crypto investors hold their U.S. dollar balances in linked financial accounts at banks insured by the FDIC. However, crypto exchanges are not insured in the same ways that bank accounts are.

Some of the larger and well-known exchanges do carry some form of insurance to compensate for losses resulting from catastrophic events or theft. Some of the more well-known exchanges that carry insurance are Gemini, Coinbase, Robinhood and Crypto.com.

While many widely-used exchanges are considered safe and carry insurance for recourse against crime and theft, it is not recommended to leave crypto holdings on exchanges. As a general practice, you should only (temporarily) keep an amount that you wish to trade on an exchange and then move to wallets after transactions are finalized.

Security experts recommend against keeping digital currency on an exchange long-term for two primary reasons. If the exchange is hacked, you may lose your holdings. Also, if the exchange were to close down or default then you may not have a viable way to recover your holdings. These exchanges will vary considerably on how they incorporate safety and security measures for their clients.

Proper due diligence is required on behalf of the individual to ensure that they are not accepting unnecessary risks through transactions processed on an unsafe or unreliable exchange. Trust is built on an established reputation, so do extensive research into any wallet or exchange before investing.