Simple Steps to Spot and Avoid Unregulated Crypto Platforms
Discover how to spot and avoid unregulated crypto platforms. These include warning signs and adequate security checks.
While Certik’s Q3 crypto hack report showed a significant decline in the number of cases witnessed this year on crypto platforms, the $750 million reported stolen by hackers is still concerning. One notable incident is the phishing attack in August 2024, whereby one investor lost $238 million in Bitcoin to hackers.
This guide discusses notable steps to spot and avoid unregulated crypto platforms. Thus, you can evade unlicenced platforms, keep your funds safe from thieves and explore the crypto space with self-assurance.
The Growth of Unregulated Crypto Platforms
The emergence of other cryptocurrencies after the launch of Bitcoin in 2009 can best be described as a double-edged sword. It has brought explosive technological progress, but along with it came unlicensed platforms.
These platforms offer a great deal of anonymity along with lower fees and quicker transactions, which appeal to many traders who wish to bypass the regulatory hurdles from exchanges.
However, the absence of regulation means that such platforms can operate without any responsibility whatsoever. Thus, users run the risk of becoming victims of any scam, fraudulent activity or even loss of all their funds.
Most investors are often attracted to paying less fees from their hard-earned money and, thus, do not weigh the opportunities and risks. Unfortunately, not everyone can access the knowledge that will help them avoid such situations.
Red Flags of Unregulated Crypto Platforms
The primary step is to identify and avoid trading with unregulated platforms. Below are some key indicators that a platform may be unsafe.
Lack of Licensing
Financial authorities perform oversight functions on legitimate crypto platforms to ensure they satisfy legal criteria and safeguard users.
Anonymous Management
Any trustworthy platform should seek to provide information related to the founder and the leadership. Anonymous management is one strategy to transcend accountability and is generally an antecedent of fraud.
Lack of Customer Support
These usually include web contact forms, live chat, an email service, or a professional phone support contact. Customer support is an integral part of the platform. Poor or even no customer support could be a serious red flag.
No Know Your Customer (KYC) Requirements
Again, KYC is one way of curbing inconsistencies and fraudulent activities. Thus, there are warning signs for KYC-only finance-based institutions. Therefore, any platform with no KYC policy in place could have ill intentions for your funds.
Negative Online Reviews
There are websites and forums on Reddit and other social platforms that provide reviews about cryptocurrency platforms. Poor reviews and complaints from different users are warning signs to stay away from such platforms.
Prioritize Security When Choosing a Platform
Safety comes first when choosing a crypto platform. Established platforms take some measures to protect your assets.
Two-factor authentication (2FA)
2FA protects your account from unauthorized persons. A lack of 2FA is a sign of a platform’s lack of security measures.
SSL Encryption
Look for the padlock icon in your browser or ensure the website begins with “https://.” This ensures that no one can view the information transfer between you and the platform.
Audits and Insured Deposits
These platforms undergo many assessments by independent companies, and they display the certificate of such audits on their website for anyone to verify and to build trust with their users.
How to Avoid Unregulated Crypto Platforms
Here are proven steps to take to ensure that you don’t trade the crypto market on any unregulated platform.
Always Examine the Company
Scrutinize the company website before depositing your funds. Check their support and what the customer reviews say about them.
Look for KYC Requirements
Users must perform some degree of due diligence, including a comprehensive KYC verification on the site. If a platform does not request to know more details about you via the KYC, it is unlikely to be an excellent place to make your crypto transactions.
Search for Strong Security Features
Highly recommended features include two-factor authentication, SSL encryption, and cold storage for digital assets. These features are essential protective measures against hacks and swindling.
Conclusion
Anyone can find opportunities everywhere in the world of cryptocurrency. However, unregulated platforms can cause you to lose an entire amount of money because of hacks, scams, or fraud. Hence, understand and look out for the warning signs above and take measures to protect your funds.