How to choose a crypto exchange? (Platform selection)

Security Protocols and Infrastructure

1. Exchanges must implement multi-signature cold storage for the majority of user funds, with less than 5% held in hot wallets.

2. Two-factor authentication should support hardware tokens like YubiKey, not just SMS-based methods.

3. Regular third-party security audits from firms such as CertiK or SlowMist must be publicly available and updated within the last six months.

4. The platform must demonstrate a clear incident response policy, including timelines for breach notification and fund recovery mechanisms.

5. Real-time monitoring systems for abnormal withdrawal patterns and API key misuse are mandatory features, not optional add-ons.

Liquidity and Order Book Depth

1. Bid-ask spreads for major pairs like BTC/USDT should remain below 0.08% during standard market hours.

2. Order book depth at ±1% from the mid-price must exceed $5 million for top-tier assets to ensure minimal slippage on trades above $100,000.

3. Matching engine throughput must sustain over 100,000 orders per second without latency spikes exceeding 50ms.

4. Market makers must be incentivized through transparent rebate structures, with at least three Tier-1 institutional market makers actively quoting.

5. Cross-exchange arbitrage opportunities should be constrained—price deviations across BTC/USD pairs on top five exchanges must stay within 0.25% for 95% of trading minutes.

Regulatory Compliance and Jurisdictional Clarity

1. The exchange must hold active licenses in at least one major jurisdiction—such as the UK’s FCA, Germany’s BaFin, or Japan’s FSA—and publish license numbers verifiably on official regulator websites.

2. KYC procedures must align with FATF Recommendation 16, requiring verified ID, proof of address, and source-of-funds documentation for withdrawals over $1,000.

3. Legal entity registration details—including registered office, incorporation number, and shareholder structure—must be disclosed in the footer of the website and cross-checked against government business registries.

4. Jurisdiction-specific data residency rules must be enforced: EU user data cannot be routed through servers located outside EEA without SCCs and supplementary transfer safeguards.

5. On-chain transaction screening tools like Chainalysis Reactor or Elliptic must be integrated into deposit and withdrawal workflows for sanctioned addresses and high-risk VASPs.

Fees and Withdrawal Mechanics

1. Taker fees for spot trading must be capped at 0.20%, with volume-based tiers clearly published and retroactively applied.

2. Blockchain withdrawal fees must be dynamically calculated based on real-time network congestion—not fixed flat rates—and displayed pre-confirmation.

3. No hidden charges for fiat on-ramps: SEPA transfers must carry zero intermediary bank fees, and USD ACH deposits must settle within one business day without reversal windows longer than 24 hours.

4. Margin trading interest rates must be published hourly on-chain via signed oracle feeds, not internal dashboards subject to manipulation.

5. Refund policies for failed withdrawals must guarantee full reimbursement within two hours, with automated retries triggered upon blockchain confirmation failure.

User Interface and Technical Accessibility

1. Trading interface must support keyboard-driven order entry with customizable hotkeys for limit, market, stop-limit, and OCO orders.

2. Real-time WebSocket feeds must deliver full order book snapshots and trade updates with sub-100ms latency, validated via client-side timestamp logging.

3. Mobile applications must pass OWASP MASVS Level 1 security standards, including certificate pinning and rooted/jailbroken device blocking.

4. API documentation must include working cURL examples, rate limit headers in every response, and sandbox environments replicating production latency and error codes.

5. Charting engine must allow native import of Pine Script v5 indicators and support timeframes down to 100ms granularity for algorithmic backtesting.

Frequently Asked Questions

Q: Does an exchange offering insurance cover all user assets?Insurance policies typically exclude losses from smart contract exploits, insider theft, or regulatory seizure—only covering custodial breaches verified by forensic auditors.

Q: Can I verify if an exchange’s reported trading volume is genuine?Yes—cross-check volume rankings on CoinGecko and CoinMarketCap against independent metrics like The Block’s Verified Volume Score and TokenInsight’s wash trade detection index.

Q: What happens to my funds if an exchange loses its banking partner?Fiat balances become illiquid until new banking rails are established; no automatic conversion to stablecoins or migration to alternate gateways occurs unless explicitly permitted in the Terms of Service.

Q: Are open-source exchange clients safer than proprietary ones?Open-source clients allow independent verification of frontend logic but do not guarantee backend integrity, wallet signing security, or custody infrastructure transparency.