In the world of cryptocurrencies, blockchains, exchanges, and trading, there’s one massive issue that, for now, we haven’t quite managed to eclipse. Hackers. They are the bugbear of any exchange, project, or investor. They strike fear into those with crypto, and they are a significant deterrent for millions of those who are not.
Fortunately, popular centralized exchanges are getting better at handling threats, with cybersecurity professionals paid enormous sums to defend exchanges, either as employees or through bounty programs. These are known as ‘White Hat’ hacking attempts, and they’ve become increasingly important to an industry that has suffered setbacks like OneCoin, Quadriga, and Mt.Gox. A mixture of scams, hackings, and Ponzi schemes have abated this disruptive financial technology’s progress.
This article will look at the best crypto exchanges for those who are security conscious, want to know that their exchange is bulletproof, and excel in their security protocols. See below for what we consider a secure trading platform to offer.
What does good personal security look like?
- Before we show you our winners, we want to give you a quick list of additional security measures that the best crypto exchange sites will offer:
- 2-Factor Authentication
- Secure account recovery procedures
- Email or SMS confirmation for withdrawals & a lock option
- Customizable settings for API key permissions
- Account lock for when you’re out of the country
- PGP encrypted emails
- SSL encryption on-site at all times
- 24/7 live chat or email customer support
Diving Deeper Into Our Winners
Each cryptocurrency exchange wants to be known for different things. Some want to offer the best margin trading experience. Others want to have the most active community of crypto enthusiasts, and most of the top crypto exchanges want to provide the best trading experience. For example, Gemini wants to be the most legitimate platform in the industry. To do this, it’s less about low fees, offering a practice trading account, or explaining how the crypto market works and more about giving cryptocurrency investors assurances that their investment will be secure. It’s about working with authorities, getting the best insurance ($200m in Gemini’s case), jumping through legal hoops, doing everything the government says, and investing profits continually into surpassing competitors.
- Gemini users’ crypto funds, USD, and GBP funds are fully insured, with $200m in reserves allocated for any losses. This $200m represents the most extensive insurance coverage purchased by any crypto custodian in the industry and is brokered and managed by multinational insurance providers Marsh and Aon
- Institutional-grade crypto storage – geographically distributed, 24/7 access-controlled secured facilities inaccessible without the proper credentials, and completely offline hardware air-gapped inside safes and locked cages
- Gemini’s HSMs (Hardware Security Models) have achieved the highest levels of the US government’s security ratings
- The Gemini cryptocurrency trading platform supports Bitcoin insurance as an additional service for their crypto assets
- The entire platform has been built by technical experts in cryptography, finance, and security, headhunting the best experts from some of their closest rivals
- Dedicated account representatives and 24/7 expert customer support
- In the United States, “Gemini Custody™ is regularly audited and subject to the capital reserve requirements and compliance standards of a traditional financial institution”
- As is typical with most crypto exchanges, if not all, crypto investors need great options to deposit funds, use their cards for purchases, and experience safe and secure withdrawals. Gemini takes care of this by requiring the highest levels of ID and bank verification to ensure smooth transactions
Many of the best cryptocurrency exchanges want the level of legitimacy that Gemini has achieved, allowing them to attract wealthy institutional investors. Unfortunately, the reality is that most of the top crypto exchanges aren’t willing to jump over those hurdles and bend at the knee as the compromise for doing so. Gemini, however, invested in a high-quality team of cryptography, finance, and security experts from around the world to ensure that the platform would be bulletproof. Since the beginning, this was the founders’ dream, the Winklevoss Twins, having seen so many exchanges rise and fall already.
Many popular crypto exchanges follow the best-practice method for protecting the physical storage of assets, which involves spreading the billions of dollars in Bitcoin reserves across numerous vaults and safes worldwide. This process consists of Hardware Security Modules (HSMs), which are physical computing devices that safely protect and store cryptographic secrets, in this case, private keys. For example, Gemini boasts the highest US Federal Information Processing Standard (FIPS) security ratings. These devices are virtually unhackable and require several levels of authentication to work, including multi-sig technology, role-based governance protocols, biometric access, and physical security, as well as whitelisting — all to make sure the private key is protected and cannot be copied.
Before we move on to the following exchange, we want to pat Gemini on the back for putting together their crypto custody whitepaper. This is an impressive document that sets out many important factors relating to security and account protection. You can read it here.
As explained and explored in other articles, Coinbase is more of a broker than a crypto exchange. But, of course, it is a cryptocurrency exchange. Still, that service is expensive and only works in real-time, so even the crypto exchanges feel like brokered deals, which is why they had to purchase and rebrand an already successful exchange (GDAX) to compete.
- As much as 98% of Coinbase’s Bitcoin and crypto portfolio is store in “encrypted, geographically separated, offline storage,” along with their customer funds
- Coinbase holdings are stored and distributed around the world, in different high-security cold storage facilities, with any sensitive data linked to data, stored offline with USB and paper backups placed in vaults and safety deposit boxes
- All accounts must use 2-Step Verification to provide an extra layer of security; this means an SMS code will be sent to your mobile phone to confirm it is you logging in
- All of Coinbase’s Bitcoin (BTC) is insured, meaning if your crypto wallet or Coinbase’s hot wallet is exploited and your coins are stolen, you have a good chance of making a successful claim. Here’s an article explaining how online funds are now insured on Coinbase
- Coinbase is more of a broker than a crypto exchange, which means it’s not the best place for crypto trading, but serves best as a website or app to buy and sell digital currencies. Because of this, they offer secure payment options (SSL Encryption) for those with a credit or debit card and require ID verification before payments are made
- AES-256 encryption is used to protect wallets and private keys
- An active community of security researchers makes up The Coinbase Bug Bounty Program to help keep customers safe. These are the friendly hackers we mentioned in the intro
Exchanging crypto-to-crypto isn’t what Coinbase does best; it’s exchanging fiat currencies for crypto in both directions, which has turned them into something of a household name. To handle and process billions of dollars worth of transactions every day takes incredible levels of security and has been remarkably successful as they’ve not been hacked since their 2012 launch. Funds are geographically separated and kept in high-security cold storage facilities, with private keys split up and placed in vaults and safety deposit boxes. Customer transactions go through SSL encrypted web pages and require 3DS secure cards and full KYC identity verification checks.
Recently, Coinbase took out a crime insurance policy in case of a significant hacking; however, this doesn’t protect individuals whose personal security leads to them being hacked (here’s a guide to improving your Coinbase account protection). So, to protect themselves from being exploited and allowing Coinbase to flourish as the best crypto exchange to buy and sell digital currencies, they set up the Coinbase Bug Bounty Program. So far, over $500,000 has been paid out in rewards to hackers for finding issues, with the $50,000 critical issue reward being the top payout.
For many, Kraken is the best crypto exchange when it comes to security, but of course, we’ve opted for Gemini and Coinbase slightly ahead of them as they excel in different areas. What is so likable about Kraken is the design. We think it’s cool; it has amazing graphic design, fun retro elements, low trading fees, and is user-friendly overall. What’s more, it does all of these things while ensuring that crypto trading is as secure as it can be.
- This might be the best cryptocurrency exchange for those who want a fun, friendly, and cool platform that doesn’t feel too corporate or white-collar but doesn’t slack when it comes to security
- Not only do they protect from hacking threats, but they maintain healthy banking relationships, were the first exchange ever to prove they hold 100% of their users’ funds, and they maintain absolute legal compliance
- Crypto investing is less risky when you know there’s a world-class team of cybersecurity engineers with decades of experience stress testing all features in the Kraken Security Labs
- It’s worth taking a look at Kraken Security Labs and the impressive work they do
- CER Live ranks the best crypto exchanges globally by how secure they are, scoring out of ten. With a huge investment in security over the last few years, Kraken is now the first to score a perfect ten, making them the best crypto exchange ever for security (according to CER)
- 95% of funds are kept offline, distributed around the world, in air-gapped safes. The servers are kept in locked cages, protected by armed guards and video surveillance, with access very strictly controlled
- Penetration testing and a lucrative bug bounty program encourage users to try and find exploits in the system
- These visual explainer guides for personal account security add a nice friendly touch to account management education
After a decade in operation, Kraken has never been hacked. Still, as well as creating an impressive resilience to malicious entities, they’ve also focused on positive collaborations, which means working with banks and auditing companies to make sure user experiences are futureproofed and compliant. Cryptocurrency exchanges face many criticisms and legal compliance issues from government bodies who continually warn individuals of using unregulated services. However, Kraken is one of the best cryptocurrency exchange businesses in negating these fears and building trust.
Like their rivals, most of their funds (95%) are kept offline, geographically dispersed, protected by armed guards and video surveillance, and are highly controlled. This is at the advice and request of Kraken Security Labs, the community of cryptography and security experts who continue to make Kraken (so far) impregnable. Also deserving of some credit is the Kraken Bug Bounty Program, which pays out a minimum of $500 in BTC rewards to those who find issues on the platform.
Coin Clarity’s Sleeper Pick
While the other exchanges were always unassailable, Gate.io is marked for two breaches, as mentioned in the intro. However, we want to be transparent and say that we believe that their high standards still place them among the best crypto exchange choices for security in recommending this platform.
- The GateChain DeFi project introduces a new stablecoin (USDG) and decentralized lending, exchanges, and liquidity mining. What’s most exciting about this chain is that it has the power to revoke stolen funds thanks to a high-performance Vault Account mechanism. Learn more here
- Asset security is something Gate is keen to tackle, having seen countless other exchanges and DeFi projects lose user funds through Smart Contract bugs and account management breaches or issues
- To help advanced traders with a large number of digital assets to protect their funds better, Gate recommends using hardware crypto wallets, as explained here
- CER Live is an exchange ranking website quite different from our own here at Coin Clarity, as they look at the top Bitcoin exchanges purely from the perspective of crypto-asset security. They had been in 1st place for the last few years running, but in 2021, they slipped to 8th
- In 2019, a White Hat hacker stole $100,000 from the exchange, alerting them to an exploit in their security before sending the funds back and allowing the team to patch it up. Remarkably, the hacker wanted no reward and didn’t reply when contacted
- Gate.io was once called Bter.com but rebranded as it left the Chinese market due to the new crypto bans and regulations enforced. Bter.com didn’t have a perfect security history; they were previously hacked for 7,000 BTC
In 2019, a White Hat hacker stole around $100,000 before returning it, allowing the platform to close up an exploit, and before rebranding as Gate.io from Bter.com, they were hacked for 7,000 BTC. Despite these events, they were recognized by cybersecurity ranking site CER Live as the most secure exchange for most of the last three years.
This industry has been plagued by hackings and compromises, with even Binance, the best crypto exchange globally, failing to make this list due to its security failings. Gate wishes to address asset security issues in the DeFi space by creating their own DeFi ecosystem called GateChain, which fundamentally ends hackings and smart contracts bugs by making stolen funds revocable. It will be interesting to see how this benefits decentralized exchanges.
So far, just over $10,000 in bug bounty rewards have been paid out by Gate, indicating either they are stingy to bounty hunters or that they are simply one of the best crypto exchanges when it comes to running a tight ship.
There you have it. We’ve now informed you of our top-ranked secure cryptocurrency exchanges. So, get out there and good luck (safely) trading. We highly recommend starting with Gemini now!