Cryptocurrency exchanges are the primary way to buy and sell cryptocurrency, but they aren’t a safe place to store assets long-term. There are several reasons why you should avoid using CEXes as a storage solution for your crypto assets.
Centralized exchanges control your funds
Crypto exchanges control your funds and private keys. If you want to access, send or receive your coins, you must permit them. If the exchange is hacked, it could take some time before you can reaccess your digital funds.
In addition to this downside, governments can shut down centralized exchanges anytime — rendering your coins inaccessible for good! There have been many cases of governments trying to crack down on crypto traders by shutting down the centralized crypto exchanges they use. Although that isn’t as common today, always opt for self-custody solutions when possible.
They are not a bank
- They do not have a vault to store your funds safely in case of a hack or other disaster.
- They can’t pay interest on deposits, so there’s no reason to entrust funds to them except when you need it.
In short, centralized exchanges are like the Wild West of money and cryptocurrency storage. There’s no sheriff in town, and all sorts of sticky situations can happen if you don’t protect yourself.
Your personal information is at risk
There are many reasons why people choose to keep their cryptocurrency on centralized exchanges. But there are also many reasons why you shouldn’t. Security of your funds—mainly your personal information—is among the biggest.
- You don’t control your private keys. When you deposit crypto into a centralized exchange, it remains until you withdraw it or sell it for fiat currency. When hackers attack an exchange and steal funds from users, those users don’t lose their coins. They lose access to them until the hacker decides to return them. And if an exchange shuts down unexpectedly due to legal issues or something else, then all bets are off.
- There have been examples where governments have demanded access. Countries like India have a history of government intervention! There have been numerous “bans” on exchanges, only to restore them afterward. Such cycles can repeat over and over, especially when cryptocurrency becomes “too popular” in such countries.
Centralized exchanges are not safe places to store money long-term
Let’s first make sure that everyone understands what a cryptocurrency exchange is. It is an online platform where you can buy and sell currencies like Bitcoin, Ethereum and others.
When deciding whether or not to use one of these platforms to store your cryptocurrency long-term, it’s important to understand what they are and how they work.
Every exchange operates like a bank by controlling user funds. No user can do anything without the exchange’s express permission.
Conclusion
The most important thing to remember is that centralized exchanges are not banks.
They are not where you should store your funds long-term, and they do not offer the same level of security as a bank account.
So if you want to hold onto your cryptocurrency for any extended period, it’s best to move it off the exchange and into your wallet.
The post 4 reasons why you shouldn’t keep crypto on centralized exchanges appeared first on CryptoMode.
