Cryptocurrency fraud is on the up. But beyond that, there is also the issue that the failure of a cryptocurrency exchange could mean you could lose access to your money.
The crypto market was shocked to the core recently when Coinbase said that should it ever go bankrupt, the assets of investors held on the exchange would be frozen as part of the usual administrative proceedings that occur when companies go bust. Back in 2008 hedge funds in Europe faced a similar shock when Lehman Brothers went out of business and assets held in custody were suddenly frozen.
"Retail crypto investors use hard cash to buy crypto at Coinbase," said Zoltan Kormanyos, Head of Legal at BrokerChooser. "The crypto is being held in a Coinbase wallet where Coinbase is acting as custodian. As soon as the crypto is put into the Coinbase wallet, the retail investor loses ownership and is left only with a personal claim for the crypto which they bought with hard cash."
With such risks facing traders, choosing the right exchange is paramount. When measuring the best exchange to trade with, there are a number of key criteria investors can use, namely:
- Regulation
- Consumer protection
- Market fairness
- Transparency
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