How to spot a crypto scam: warning signs and what to do
The most common crypto scams, the warning signs they share, how to check a platform, and what to do if you have been scammed.
Quick answer
To choose a crypto exchange safely, first confirm it is registered or authorised by the financial regulator where you live. Then check its security features, such as two-factor authentication, withdrawal allow-lists and proof-of-reserves reports. Compare the total fees, including spreads, not just the trading fee. Make sure you can deposit and withdraw in your currency. Start with a small amount, test a withdrawal, and avoid keeping more on the exchange than you need for trading.
Key takeaways
- Regulation comes first: in the EU, check ESMA's MiCA register; in the UK, check that the firm is registered with the FCA.
- Look at the full cost, which includes trading fees, spreads, deposit and withdrawal fees and network fees.
- Turn on strong two-factor authentication and withdrawal address allow-lists from day one.
- For long-term holdings, many people move crypto into a wallet they control.
A crypto exchange holds your money, your identity documents and often your crypto. When an exchange fails, gets hacked or turns out to be a fraud, customers can lose everything. Choosing carefully is the most important step you can take before you buy your first coin.
This guide covers what to check, how to compare fees, and the warning signs of an unsafe platform. It is not investment advice, and crypto remains a high-risk, volatile asset.
1. Check regulation where you live
| Region | What to check |
|---|---|
| European Union | The exchange should appear as an authorised crypto-asset service provider (CASP) in ESMA's MiCA register. ESMA urges investors to check this, because clients of unauthorised firms don't get MiCA's protections. |
| United Kingdom | Crypto businesses offering in-scope services must register with the Financial Conduct Authority (FCA) under the Money Laundering Regulations before they start. Search the FCA's Financial Services Register and check the FCA's warning list. |
| United States | Check federal registration with FinCEN as a money services business and the licences required in your state. |
| Elsewhere | Search your national financial regulator's website for licensed firms and investor warnings. |
Registration does not make an investment safe or guarantee you won't lose money, but an unregistered platform is a serious red flag.
2. Review security features
- Two-factor authentication (2FA) using an authenticator app or hardware key, not just SMS.
- Withdrawal address allow-lists and time delays when you add new addresses.
- Anti-phishing codes in official emails.
- Proof of reserves or independent attestations showing customer assets are held, ideally alongside liabilities.
- Clear custody arrangements: how customer assets are stored and kept separate from company funds.
- Security history: past hacks, and how the exchange treated affected customers.
3. Compare the real cost
| Cost | What to look for |
|---|---|
| Trading fees | Maker and taker fees on the advanced trading screen |
| Spread | The hidden gap between buy and sell prices on "simple" buy buttons, often the biggest cost for beginners |
| Deposit and withdrawal fees | Card deposits are often expensive; bank transfers are usually cheaper |
| Network and withdrawal fees | Charged when you move crypto off the exchange |
| Conversion fees | For paying in a currency the exchange doesn't support directly |
4. Check usability and support
- Supports your local currency and payment methods.
- Offers the coins you actually want. A huge list isn't necessarily better.
- Has clear identity verification (KYC). Legitimate exchanges must verify customers.
- Offers reachable support, and a clear complaints process.
- Provides transaction reports for tax.
Warning signs of an unsafe exchange
- It isn't on any regulator's register, or appears on a regulator's warning list.
- Someone you met online recommended it and "helps" you trade.
- It promises guaranteed returns, or high fixed yields with no explanation.
- Withdrawals are delayed, or require extra "fees" or "taxes" first.
- The domain is very new, or the app is only available via a direct download link.
Read our guide on how to spot a crypto scam for more red flags.
A safe way to get started
- Pick a regulated exchange and download its app from the official app store.
- Turn on 2FA and an allow-list before depositing.
- Deposit a small amount by bank transfer and make a small purchase.
- Test a withdrawal, back to your bank and to a wallet, before adding more.
- Keep records of every transaction for tax purposes.
Browse crypto exchanges and financial advisors on Trades Area, and always verify a firm with your regulator before you sign up.
Frequently asked questions
How do I know if a crypto exchange is regulated?
Search your regulator's official register. That means ESMA's MiCA register in the EU, the FCA register in the UK, or your national regulator elsewhere.
Is it safe to keep crypto on an exchange?
It carries risk, because the exchange holds your assets. Many people keep only what they trade on an exchange and move long-term holdings to a wallet they control.
What fees do crypto exchanges charge?
Common fees include trading fees, spreads, deposit and withdrawal fees, and network fees. The spread on simple buy buttons is often the largest cost.
What is proof of reserves?
It is a report or attestation intended to show that an exchange holds the customer assets it claims. It is most useful when it also covers liabilities and is checked independently.
Sources: ESMA: Markets in Crypto-Assets Regulation (MiCA) and interim register · FCA: Cryptoassets AML/CTF regime
This article is general information, not financial or investment advice. Crypto is high risk and you could lose all the money you invest.
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