Metal golden Ethereum in brown leather wallet on laptop keyboard background. Cryptocurrency concept.

As the financial industry is also experiencing digitization, money trading with digital currency is becoming a new global trend. In addition to this, cryptocurrencies have emerged as the replacement of fiat payment options and due to their exceptional key aspects, many jurisdictions are making them a legal tender. However, digital crypto money is decentralized and has a volatile nature, making it more vulnerable to financial losses. Furthermore, cryptocurrencies are not developed or regulated by governments, hence, are considered vulnerable to financial crimes such as money laundering and terrorist financing. 

Therefore, as the instance of financial crimes is increasingly growing, the digital coins and their service providers are becoming subject to regulatory obligations including anti-money laundering regulations. Thus, the concept of KYC digital currency exchange is gaining attraction as they are complied with the regulatory obligation and have rigid security systems that protect your information along with the assets. Thus, with the increase in coinlager fiat to digital currency exchange trading across the globe, customers can now instantly become part of the cryptocurrency ecosystem and can make transactions with conventional money, even without mandating customers to bank accounts. 

How Should You Store Your Cryptocurrencies?

In order to initiate cryptocurrency trading or to place the first order, customers need to get a digital wallet or onboard on the exchange, but what is the difference between both things? Coinbase and Binance are among the top trending exchanges across the world with the highest market capacity as well as a number of users. Whereas, Electrum, Wasabi, and Trezor are among legit wallets.

Let’s dive into the key difference between these two concepts, as well as their benefits.

Crypto Wallet vs Exchange: Differences

Among other differences, the storage or holding factor is one of the key differences between the exchange and the wallet. A digital cryptocurrency wallet is just not an online wallet but it is a software or application that doesn’t store crypto assets rather it just holds the private and primary keys associated with your coins or assets. These keys are proof that particular assets are owned by you. However, cryptocurrency wallets are divided into two kinds, cold and hot respectively. Hot wallets are particular web or application-based software that requires an internet connection whereas cold wallets are the kind of offline wallets that are not software but sort of hardware, such as paper or USB.

Whereas, digital cryptocurrency exchanges are among the most real-life examples of hot wallets. This enables customers to buy and store coins or assets in online exchange accounts. However, fiat currency can be also added into exchange accounts and can be used to trade cryptocurrencies, as well as enabling the transfer of assets to other exchanges or coinlager digital wallets for cryptocurrency exchange. However, when your cryptocurrencies are in an online account, you will not be able to access the private keys.

Crypto Wallet vs Exchanges: Risks

To back the cryptocurrency market, exchanges and crypto wallets have emerged with an aim of allowing customers to initiate trading activities.  Both the digital wallets and exchanges have come up with advantages and disadvantages, particularly associated with control and security.

Digital crypto wallets offer customers complete control over their private keys placed in the wallets. However, as governments across various jurisdictions are putting sanctions as well as imposing laws on cryptocurrency exchanges, there lies a fear of banning exchanges or cryptocurrency usage, hence, cutting off people to access their private keys. In addition to this, people can use cold wallets to limit the risk of key theft.

However, complete control comes up with social responsibility. For instance, if someone loses a digital currency wallet credential or someone else gains unauthorized access to personal information, one can lose all the assets and coins placed in the wallet. 

However, there was one rumor about Satoshi Nakamoto, that he lost access to his wallet and lost millions of billions worth of bitcoin. Thus, hacks and data breaches can result in serious consequences, damaging the exchange’s reputation along with financial loss.

Thus, as there is no rigid set of standards and laws for wallets and exchanges and having the factor of decentralization as well as anonymity factor, it’s full of risks.  Yet, the cryptocurrency ecosystem is based on blockchain technology, every crypto transaction is recorded on the distributed databases, so data remains somewhat secured.

Final Thoughts 

In fact, digital crypto money is gaining global popularity and has successfully gained the attention of the mass audience.  With this, tens of hundreds of wallets and exchanges have emerged to assist the customers to step into the cryptocurrency ecosystem. However, with time the number of crimes and scams associated with this industry is also rising, thus integrating identity verification solutions to reduce the instance is becoming the new norm.

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