Crypto exchanges and security: what you need to know

Today, the popularity of crypto exchangers is growing, which allow you to quickly and conveniently change crypto. But when choosing such a service, you need to be careful. Firstly, financial services have always attracted the attention of scammers. Secondly, not every company is able to provide high-quality and, most importantly, safe services. We will tell you how to choose a reliable service that you can use without fear.

The popularity of crypto has reached a new level. And this is a completely natural phenomenon. If previously people were mainly interested in digital currencies only as investors, simply buying coins and expecting their prices to rise significantly, today many are also attracted by the ease and speed of transfers that crypto provides. Including transfers abroad. It is logical that the popularity of crypto exchangers is growing rapidly.

What are crypto exchangers

Crypto exchangers are services with which you can exchange regular fiat money for crypto, as well as exchange various cryptocurrencies among themselves. It works as simply as possible: the client selects the asset he wants to buy and the wallet number for crediting it. Next, he pays the cost of the exchange, as well as a small service commission for conducting the transaction, and after that he receives the purchased currency.

It is worth noting that cryptocurrency exchanges also have such functionality, but these platforms were created for other active trading of digital currencies. In essence, this is a trading platform similar to a stock exchange, with the difference that it specializes in operations with cryptocurrencies. There is the opportunity to trade using credit funds, affiliate programs, mining pools and much more. Exchange is only part of its capabilities. And using exchanges purely for exchange is like hammering nails with a microscope - it is possible, but impractical. Not to mention that this is not entirely convenient, because exchanges are burdened with unnecessary options. Crypto exchangers have only one function - swap crypto. Everything here is simple and clear. And this is exactly what many people need right now. Therefore, the audience of their users is constantly growing. However, there are certain risks here. Especially if this is your first time encountering digital currencies.

Risks

Theft of funds

Losing money is a problem that you can encounter if you end up on a “gray” exchanger or scammers. When buying crypto, the client enters the number of his card, crypto wallet and transfers fiat money to the bank card specified by the service. If the service is unverified, then nothing may simply happen. The client does not receive currency instead of the funds provided, and the “exchanger” retains his personal data: card number, phone number, email. Unverified platforms may send unfounded KYC (Know Your Customer ) requests to obtain data to identify counterparties.

Involvement in money laundering schemes

Cryptocurrency, like traditional money, can be “clean” or “dirty”. The latter is the one that was involved in operations related to criminal activities: the financing of terrorism, the sale of drugs, and was obtained as a result of hacker attacks and other illegal activities. To understand the scale of this phenomenon: according to Chainalysis, in 2021 the volume of criminal transactions with cryptocurrency was equivalent to $14 billion. About 46% of digital assets in the world could be involved in illegal transactions.

The crypt does not say whether it is “clean”, and the user will not be able to find out its history on his own. However, professional platforms can do this. And, having bought “dirty” coins through an unverified service, in the future the client is unlikely to be able to sell them at the current rate (or sell them at all).

The risk of buying such coins may be on exchangers that do not comply with AML (Anti-Money Laundering) standards. This is a set of measures taken by financial market players (including cryptocurrency) to identify and prevent the laundering of funds obtained by criminal means. Fraudsters discover such platforms and convert funds through them, shifting the responsibility to the exchangers and their clients.

Cheating on courses

It is better to refrain from using services that offer exchange rates that differ significantly from market ones. Many unverified exchangers do not neglect the fact that they deliberately send false data to sites that monitor rates on different platforms in order to reach the top list of resources with the best rates for the most popular currency pairs. But when a person goes to the service’s website, the real exchange rate may no longer be profitable.

There are also fraudulent schemes where victims are lured with overly attractive rates. For example, first, thieves send a person to a real exchanger and offer to buy cryptocurrency there at the market price. Then they take you to their own website, where the exchange rate  is much more favorable than the market one.

Before buying or exchanging currencies through a particular platform for the first time, you should check rates on other exchangers, as well as on services that simply track the value of cryptocurrencies.

How to choose a secure service

Reputation and reviews

The first thing you need to do to avoid scammers or an exchanger that is not able to provide quality work is to check its reputation and read user reviews. There are resources that compile ratings of crypto exchangers and collect information about them.

There are also reviews where users of exchangers share their impressions of cooperation. So, there are custom reviews online, when companies praise themselves or pay others for it, and this is also worth taking into account. However, if there are a lot of reviews and almost all of them are positive, then the service really deserves attention.

Secure connection

This is a factor that needs to be taken into account when using any financial service online. Make sure that the site uses the secure HTTPS connection protocol, as indicated by the padlock sign in the browser address bar. 

It is safer to deal with an exchanger that will check the wallet addresses of all clients carrying out transactions for involvement in criminal activities. This makes life much more difficult for scammers, and conscientious clients can be confident that they will not buy “dirty” coins and will not be involved in their laundering.

Thanks to modern technologies, exchanging cryptocurrencies is quite simple, and a better understanding of the processes allows you to avoid all potential difficulties. But no matter how reliable the service you choose, there is one more rule that should always be followed: split large amounts and never exchange them in one transaction.