The warnings from deVere Group’s Nigel Green comes as the U.S. Securities and Exchange Commission (SEC) is investigating whether a U.S. based cryptocurrency exchange illegitimately let users trade digital assets that have not been registered as securities.
This SEC investigation is separate from that company’s alleged insider trading scheme that led to the fraud charges against three ex-employees last Thursday.
Nigel Green, who launched the pioneering deVere Crypto app in 2018, comments:
“Most exchanges add to their coin offering list on a regular basis as each one has a different set of characteristics.
“But the exchange should not be in the business of adding any and all new crypto as, clearly, this presents obvious and avoidable, and potentially costly, risks to users.
“Due diligence by industry experts is critical and should be carried out as a matter of course before any new coin is added.
“You should ensure this is part of the exchange’s policy.”
Other issues you should consider when choosing a crypto exchange include security.
“Most crypto exchanges offer basic protections like two-factor authentication, others will need official identification such as a passport or driver’s licence to open a new account.
Some also have authentication codes required when you buy or sell, or if you make major account changes,” explains the deVere CEO.
In addition, prospective users should compare the fees charged which can vary considerably, and can be charged in different ways – for example by transaction or payment method.
“Liquidity is important. You’ll want to know that you can exchange your traditional currencies into crypto and vice versa with no hassle.
A good way to look at this is by trading volumes – the higher the better,” says Nigel Green.
“Plus, you should see which company owns the exchange.
Is it well-established? Is it a global company that can handle complicated issues across multiple jurisdictions? Is it experienced in both fintech and traditional financial services? Is there a proper client service department to deal with any issues quickly and effectively? Are there news and educational resources on offer?
The deVere CEO concludes:
“The issues facing some of the biggest crypto exchanges right now highlight why you should spend some time on choosing the right one.
Don’t necessarily just jump on the ones with the flashiest TV ads and celebrity ambassadors.
“Security, liquidity, fees, history and user experience are essential checks you should make.
“Crypto is, inevitably, the future of money.
But you need to get it right from the get-go.
“It might take time, but your future self will thank you for it.”