Table of Contents
Show more
Show less
This article is for informational purposes only and is not a financial promotion. It does not recommend any provider, product or strategy. For more information visit the FCA’s guide.
If you’re interested in crypto and you’re comfortable with how volatile and unpredictable the market can be, you may be looking for somewhere to start trading in the UK.
Cryptocurrency exchanges are websites and apps that traders use to buy, sell and swap crypto. There are a lot of them, with features and fees varying from one to the next.
We’ve put this guide together to highlight some of the important aspects to consider if you’re looking to get started with trading or want to try a new exchange.
Choosing the best crypto exchange app or website
There are three key areas to look at when you’re choosing an exchange: fees, features and security.
Before you dive deep into these key areas, however, you should check the exchange you’re interested in actually lists the cryptocurrency you want to trade, and if it is registered with the UK regulator, the Financial Conduct Authority (FCA).
There’s no sense in signing up for an exchange if it doesn’t list the cryptocurrencies you’re interested in. FCA registration, meanwhile, gives you some assurance that the exchange is reputable, since it has to comply with the regulator’s anti money-laundering rules.
Fees
Signing up to a crypto exchange app or website is usually free in the UK, although increasingly they offer paid membership, with benefits such as reduced transaction fees.
While opening a basic account is typically free, fees often apply when you credit your account with fiat currency (such as sterling), make a transaction or withdraw funds.
In most cases, you’ll pay fees when you credit your account using a payment method other than bank transfer. Bank transfers tend to be free, while the use of credit cards, debit cards and payment providers usually attracts fees of around 3%. There are also usually limits on deposits.
Note that not all banks permit cryptocurrency payments with a credit card, and some will block any such transaction you attempt to make.
Fees then apply when you make a trade, such as buying £10-worth of Ethereum (ETH). Many exchanges charge two types of fee: ‘maker fees’ and ‘taker fees’. Which of the two you’ll pay depends on the kind of trade you’re making.
Maker fees apply when a trader places a crypto order that hinges on specific criteria. For example, they may decide to sell some of their assets when prices reach a certain threshold. As such, the trade doesn’t happen immediately. Instead, the sale occurs on a future date when the criteria are met.
This kind of trade adds liquidity to the market and contributes to stability. Maker fees are often lower than taker fees as a result.
Taker fees are charged when a trader places an order that matches an existing corresponding trade on the books (makers’ trades) and is fulfilled straight away, taking liquidity away from the market. Taker fees are often (but not always) higher than maker fees as a consequence.
Some exchanges offer subscriptions which waive fees or offer lower fees to those who make large numbers of trades, or to those who pay a monthly subscription. Others charge a flat fee of, say, 1%.
There are sometimes fees to pay when you want to withdraw funds from your account, for example, £2 per withdrawal. Crypto exchanges that offer ‘staking’ also typically charge between 2% and 5%, which is deducted from any rewards earned by the staker.
Staking involves putting up crypto assets as collateral for the chance to validate a block of transactions on the blockchain and earn a share of the reward.
Features
The first and most basic feature to check for is whether an exchange offers the crypto asset you’re looking to trade.
A major crypto such as bitcoin is widely available across the market, but more niche coins may be harder to find. Exchanges with greater numbers of coins to trade are more likely to offer the more niche coins.
Advanced trading features
Some exchanges offer advanced trading features such as futures trading, staking and lending. If you’re interested in more than just buying, selling and swapping crypto, you’ll need to find an exchange that offers these kinds of features.
Futures trading involves making bets on the future performance of crypto assets, giving investors market exposure without having to directly purchase coins.
Other advanced features include stop-loss/take-profit orders that allow traders to automate trades when prices reach predetermined levels, and one-cancels-the-other (OCO) orders, where one trade automatically cancels the execution of another.
Advanced trading features are not suitable for beginners and may not be the most important consideration if you’re coming to crypto trading for the first time.
Storage
You’ll generally find that crypto exchanges offer free custodial crypto storage. While crypto itself isn’t technically stored anywhere because it has no physical or digital form, traders need somewhere to store their crypto keys.
Crypto keys are alphanumeric strings that are used to authorise crypto trades. Whoever has the pair of keys associated with a wallet can do whatever they want with the crypto assets associated with the same wallet, such as moving assets to their own wallet, or executing trades with them.
Public keys have to be shared in order to receive transfers. Private keys must be kept secret, and that’s what makes crypto storage necessary.
Traders can always choose fee-charging, third-party crypto wallet providers or offline hardware wallets, but custodial wallets offered by crypto exchanges are perhaps the most convenient storage method as users need only remember their exchange account credentials to access their wallets.
Liquidity
An exchange’s liquidity determines how it handles trades, especially when large sums are involved.
An exchange with greater liquidity allows users to buy and sell more quickly, which is crucial when you want to respond to a fast-moving market. The best exchanges generally tend to be transparent about their liquidity.
Higher liquidity also reduces the risk of ‘slippage’, which is the difference between the expected price of a trade and the actual price at the point of execution.
Security and insurance
The number of crypto keys held by crypto exchanges makes them prime targets for hackers, which means security is an important consideration when choosing an exchange. It’s a good idea to check whether an exchange has ever been hacked, as well as its current security protocols.
These might involve keeping customers’ assets in ‘cold’ storage (disconnected from the internet and a little further out of hackers’ reach).
Look also for exchanges that employ two-factor authentication (2FA) for account security. Be aware, meanwhile, that any exchange meeting its UK anti money-laundering and Know Your Customer (KYC) obligations will ask you to verify your identity as part of the sign-up process.
Several crypto exchanges have funds set up to compensate customers in the event of a hack in which they lose assets. Some exchanges provide proof of reserves, as audited and verified by independent third parties.
Don’t forget reviews
Real users’ experiences with crypto exchanges and crypto exchange apps can be a great help when choosing between them. Look for an exchange with a high rating on a site such as Trustpilot, from a high number of reviews.
While you’re there, check what the lower-scoring reviews say – it may be there’s a common thread in the complaints that would pose particular problems for you.
Remember to check the reviews on the iPhone App Store or Google Play Store if you’re on Android. Many people prefer to trade from their phone because they can react quickly to market movements. App reviewers can help you to decide if an exchange is right for you.
Crypto Exchange FAQs
How does a crypto exchange work?
Crypto exchanges work a lot like the share brokerage platforms you may be more familiar with. Each offers a portal where you can create different order types to buy, sell and speculate on cryptocurrencies with other users.
Crypto exchanges can be centralised, meaning they are managed by one corporate authority, like a brokerage company that facilitates the security of trades, or decentralised.
Decentralised exchanges generally distribute verification powers to anyone willing to join a network and certify transactions, much like cryptocurrency blockchains themselves. This may help increase accountability and transparency as well as ensure an exchange can keep running if something happens to the company that operates it.
How do you buy crypto?
To buy cryptocurrency, you’ll need to create an account with a crypto exchange. You may need to obtain a crypto wallet to hold your cryptocurrency, or your exchange may provide one. Be careful when picking a crypto exchange as some provide wallets that do not let you transfer your coins off the platform. This may create security risks, for instance if they are hacked. You’d have to sell and rebuy your coins, which might have tax implications.
Once you’ve picked an exchange and a wallet, you’ll be able to buy crypto by transferring money into your account You may even be able to buy crypto with a credit or debit card, though this may carry additional fees, some of which can get quite high, possibly up to 5% of your transaction (and some banks will block such transactions). Some crypto exchanges will let you use other cryptocurrencies or their own branded stablecoins to fund transactions.
How much money do you need to buy crypto?
Exchanges have different requirements, often depending on the type of cryptocurrency you want to buy. You may be able to buy fractional shares of coins for pennies or just a few pounds. Be sure to check your chosen crypto exchange’s requirements for the coin you want to buy.
How do I open a crypto exchange account?
To open a crypto exchange account in the UK, visit the exchange’s website or download its app. Each crypto exchange has its own unique registration process, and with some, you may be able to make an account and buy and sell small amounts of crypto without verifying your identity or submitting much sensitive information. But as the industry has evolved, measures to prevent money laundering and fraud have been introduced. In general, you’ll need to provide:
- Name
- Date of birth
- Postal address
- An official identity document (passport or driving licence).
Which crypto exchange should I choose?
There’s no universal ‘best’ crypto exchange. The best crypto exchange for you will depend on your personal circumstances, preferences and investing goals.
