Choose a cryptocurrency exchange by checking the exact legal entity serving you, what its custody agreement lets it do with your assets, how you can recover or withdraw them, and what protections apply if the provider fails. Do not treat a regulatory registration, a “proof of reserves” report, or an insurance claim as a universal safety guarantee. The right answer depends on your country, the service and assets involved, and the provider’s current terms.
How to check whether a crypto exchange is regulated
Start with the legal entity named in the account agreement—not just the exchange’s brand. A single brand may use different entities for different countries or services, and authorization for one activity does not automatically cover every product it offers.
- Find the contracting entity. Look in the account terms, custody agreement, or other customer contract for the full legal name and where the entity is established.
- Check the service and your location. Identify which regulator or authorization applies to that entity’s specific service for residents of your country. Where relevant, check the regulator’s official register.
- Read the scope, not just the status. Confirm that the listed authorization covers the service you plan to use. Registration or authorization is not, by itself, a guarantee against loss, insolvency, or withdrawal restrictions.
Legal protections vary by jurisdiction and product. For example, the U.S. Securities and Exchange Commission’s Investor.gov alert explains that protections for bank deposits and certain registered securities accounts are not equivalent to crypto exchange balances in the context it discusses. Michigan’s Department of Attorney General separately warns that customers of unregistered exchanges may lack specific protections and could lose assets if an exchange fails. These statements have specific legal and factual scope; they should not be read as a universal rule for every provider or customer.
What the custody agreement should tell you
When an exchange holds crypto for you, you depend on its systems and legal arrangements to access the assets. Read the custody agreement and asset-use terms before depositing funds. Focus on the rights you have to the assets and the provider’s obligations, especially if it becomes insolvent.
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- Ownership and records: How does the agreement describe your rights to the assets? Does the provider keep records that identify each customer’s position?
- Segregation and commingling: Are customer assets held separately from the provider’s own assets, or may they be pooled? What does the agreement say happens to customer assets in insolvency?
- Use of assets: Can the provider lend, pledge, rehypothecate, or otherwise use your crypto for its own account? If a separate yield or lending service is offered, is participation optional and based on a distinct consent?
- Return and access: What does the provider promise about returning crypto or access to it? Check the process, any conditions, and what the terms say about delays, holds, or interruptions.
- Loss allocation: What responsibility does the provider accept for losses, and what exclusions or limits apply?
For crypto-asset service providers covered by the EU’s Markets in Crypto-Assets Regulation (MiCA), Article 70 includes requirements to safeguard client ownership rights and prevent use of client crypto-assets for the provider’s own account. Article 75 includes custody, segregation, and insolvency-related provisions, as well as return procedures. These rules apply only within their legal scope; verify whether the particular entity and service are covered rather than assuming the rules apply to every exchange or customer.
What to check about private keys and security
Ask who controls the private keys and who operates the custody service. Find out whether custody is provided in-house or by a subcontractor, what the provider says about hot and cold storage, and what physical, cyber, and access controls it describes. Look for a custody policy or service description that explains the arrangements; a broad security label alone does not establish how they work.
Account defenses address a different risk: someone taking over your login. Use a unique, strong password and multi-factor authentication (MFA). Check which MFA options are available, how account recovery works, and whether the exchange offers new-device alerts or withdrawal approvals. Investor.gov recommends strong passwords and MFA. These measures can reduce account-takeover exposure, but they do not resolve custody, operational, or insolvency risk.
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Be alert for phishing attempts that imitate the exchange or ask you to disclose login credentials or recovery information. Before relying on a provider’s recovery process, understand what evidence it requires, how to reach support, and how to escalate a locked-account or suspicious-withdrawal issue.
What proof of reserves actually proves
Proof of reserves is a disclosure about assets examined under a particular assessment; it is not automatically a full financial-statement audit, proof of solvency, or a guarantee that you can withdraw. A reserve assessment may differ in what wallets and accounts it covers, whether it includes customer liabilities, how often it is conducted, what methodology and assurance standard it uses, and whether the provider doing the work is independent and qualified.
Read the report itself. Check its date, the assets and liabilities covered, its methodology, the level of assurance, the provider’s role, and any exclusions. A snapshot that does not establish customer liabilities cannot, by itself, show that reserves cover all customer claims or that the exchange will remain able to meet withdrawals.
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- WORKS WITH 1000+ ACCOUNTS: Compatible with popular accounts like Google, Microsoft, and Apple. A single YubiKey 5 NFC secures 100+ of your favorite accounts, including email, password managers, and more
- FAST & CONVENIENT LOGIN: Plug in your YubiKey 5 NFC via USB and tap it, or tap it against your phone (NFC), to authenticate. No batteries, no internet connection, and no extra fees required
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The SEC investor education staff’s Investor.gov alert cautions that management discretion over scope, reserve determination, assurance, provider, and disclosure undermines claims that proof of reserves offers protections similar to a financial-statement audit. The alert says: “In sum, investors should exercise extreme caution when relying on proof of reserves to conclude that a crypto asset entity has sufficient reserve assets to meet customer liabilities.” The page describes this as staff guidance, not a rule or Commission statement.
Is crypto on an exchange insured?
Do not assume crypto held on an exchange receives FDIC deposit insurance or SIPC protection. The SEC alert distinguishes crypto exchange balances from protections available for bank deposits and certain registered securities accounts in the U.S. context it addresses. Check the legal entity, product, and applicable jurisdiction rather than applying a familiar bank or brokerage protection to a crypto balance.
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- POWERFUL SECURITY KEY: The Security Key NFC is the essential physical passkey for protecting your digital life from phishing attacks. It ensures only you can access your accounts.
- WORKS WITH 1000+ ACCOUNTS: Compatible with Google, Microsoft, and Apple. A single Security Key NFC secures 100 of your favorite accounts, including email, password managers, and more.
- FAST & CONVENIENT LOGIN: Plug in your Security Key NFC via USB-A and tap it, or tap it against your phone (NFC) to authenticate. No batteries, no internet connection, and no extra fees required.
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- Who is the policyholder, and which event or loss does the policy cover?
- Does it cover customer assets, or only assets in wallets controlled by the company?
- What limits, exclusions, and claim procedures apply?
- Does the policy address the risks you care about, such as theft, employee misconduct, or provider insolvency?
A policy’s existence does not establish that every customer loss is covered or that customers can make a direct claim. Read the actual terms and exclusions where they are available.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to assess withdrawals and service fit
Custody is only useful if you can access or move your assets under the conditions you expect. For each coin you plan to hold, check the supported network, withdrawal limits, fees, processing expectations, and any holds that may apply. Confirm the terms for account closure or transferring assets away, and review the provider’s current service-status notices because availability and withdrawal conditions can change.
For covered custodians, MiCA Article 75 includes procedures to return client crypto-assets or the means of access as soon as possible. Confirm that the entity and service fall within the regulation’s scope; a legal requirement does not tell you whether a particular withdrawal is currently available or how a different jurisdiction treats it.
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- POWERFUL SECURITY KEY: The YubiKey 5 is a versatile physical passkey that protects your digital life from phishing attacks. It ensures only you can access your accounts.
- WORKS WITH 1000+ ACCOUNTS: Compatible with popular accounts like Google, Microsoft, and Apple. A single YubiKey 5 secures 100+ of your favorite accounts, including email, password managers, and more.
- FAST & CONVENIENT LOGIN: Plug in your YubiKey 5 via USB and tap it to authenticate. No batteries, no internet connection, and no extra fees required.
- MOST SECURE PASSKEY: Supports FIDO2/WebAuthn, FIDO U2F, Yubico OTP, OATH-TOTP/HOTP, Smart card (PIV), and OpenPGP. That means it’s versatile, working almost anywhere you need it.
- BUILT TO LAST: Made from tough, waterproof, and crush-resistant materials. Manufactured in Sweden and programmed in the USA with the highest security standards.
Also compare supported assets and networks, trading and transfer fees, any custody or account fees, transaction limits, customer-service channels, and the cost or process of moving assets to another provider. A low trading fee may not make an exchange a good fit if it lacks the network you need or makes withdrawals impractical.
Should you keep crypto on an exchange or use a wallet?
Keeping crypto with an exchange means relying on the provider to control access to the private keys. A hack, shutdown, or bankruptcy can affect access. Self-custody changes who controls the keys: you take responsibility for protecting them and for keeping recovery information safe. Lost or stolen keys or seed phrases can mean permanent loss of access.
A hardware wallet is an optional physical tool for people who choose cold self-custody; it does not protect assets that remain on an exchange or eliminate the risks of self-custody. Before choosing a wallet, verify that it supports the assets and networks you use and understand its recovery process. Investor.gov notes that physical cold-wallet devices typically cost money and explains the related key-management responsibilities.
Choose based on what you can manage reliably. If you trade frequently, an exchange may be convenient, but you still need to understand its custody terms and access risks. If you move assets to self-custody, you take on the operational responsibility for key protection and recovery. Neither arrangement is risk-free.
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A practical exchange comparison checklist
Compare candidate providers using the same questions, and keep a dated record because terms, availability, and controls can change.
- What exact legal entity serves me, and what authorization applies to this service where I live?
- What rights do I have to my assets, and how are they treated if the provider fails?
- Who controls the keys, and does the provider or a subcontractor custody them?
- Can customer assets be lent, pledged, rehypothecated, or used for the provider’s own account?
- What does any reserves report cover, when was it prepared, and does it address liabilities?
- What insurance is described, who and what does it cover, and what are the exclusions?
- Can I withdraw the assets over the network I need, and what limits, fees, holds, and procedures apply?
- Which MFA, login alerts, withdrawal controls, recovery routes, and support channels are available?
- What will it cost to trade, transfer, hold, or close the account?
The Federal Reserve, FDIC, and OCC said in a joint statement dated July 14, 2025, that existing risk-management principles apply to banks’ crypto-asset safekeeping activity, and reminded banks to operate safely and soundly and comply with applicable law. The statement did not create new supervisory expectations. It concerns banking organizations’ safekeeping activity; it is not an endorsement of crypto exchanges or a consumer guarantee.
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