What is the best crypto exchange UK? Some information to help you decide which crypto exchange is right for you and your cryptocurrencies.
What is the best crypto exchange in the UK? The deciding factors
How to decide which is the best crypto exchange in the UK is? Here's the skinny to help inform your decision on what is right for you and what you want to do with your cryptocurrencies.
What is a crypto exchange?
A cryptocurrency exchange is a website or an app that lets you buy and sell different kinds of cryptocurrencies like Bitcoin, Ethereum, or XRP. You can also swap them for regular money (fiat).*
NB Where you see the following symbol “*“, please note the standard risk warning at the bottom of the article.
There are two kinds of exchanges.
Decentralised exchange or a DEX
A DEX, or a decentralised exchange, is a type of cryptocurrency exchange that is run by the people who use it and not by a company. It has more freedom and privacy, but also more risks. A UK example is 1inch.
Centralised exchange or a CEX
A CEX, or a centralised exchange, is a type of cryptocurrency exchange that is controlled by the company that runs it. It has more protection and convenience, but it can apply its own rules, so users need to abide by these. CoinJar is an example of a centralised exchange.
Crypto broker
In the UK, some companies choose to offer trading platforms that seem like a crypto exchange, however, they actually operate as a broker.
A broker is a person or a company that acts as a middleman between you and the cryptocurrency exchange. eToro are an example of a broker that seems like a crypto exchange. They charge a fee to be the middleman.
What is the best crypto exchange UK: Some facts to help you to choose
So what is the best-suited crypto exchange for your investment needs in the UK? That’s the million-pound question. Or should we say, the million-Bitcoin question! It really depends on what you want to do on a crypto exchange.
CEXs
The most common (and user-friendly) type of exchange, CEXs, functions similarly to conventional stock market exchanges. They are governed by a central company, and users trust the exchange to manage their funds and carry out their trades.
These are great for beginners or for those who want to use the most popular method to buy and sell crypto. But you’ll have to play by the rules in the UK, which include handing over your ID and proving who you are, completing an assessment and a 24 hour “cooling off” period, before you can open an account.
DEXs
DEXs, on the other hand, operate on a decentralised network and do not rely on a central authority to hold funds. Instead, trades are conducted directly between users using smart contracts. This is an agreement between the buyer and seller that is coded into the transaction.
But, DEXs tend to be way more complex to use and tend to be less user-friendly. Users need to be at a higher level of knowledge to interact with them.
Additionally, DEXs tend to have less crypto held on the exchange for users to buy and sell (this is called liquidity) so sometimes trades can take longer to execute, and because of this, fees can sometimes be non competitive.
Brokers
Brokers usually charge uncompetitive fees and spreads to cover their expenses, including payments to outside exchanges for executing trades. They typically do not hold the cryptocurrency being traded, but rather keep it on outside exchanges.
Customers have to just trust that these brokers have made good alliances.
Other considerations
When choosing a platform, it is also important to consider the regulatory aspects. This means looking for platforms that comply with regulations and are registered with local authorities. This ensures that you are protected against fraud.
You could also consider factors like transaction fees, user-friendly touches, and available cryptocurrencies. Not every exchange has a wide variety of cryptocurrencies.
Key differences between exchanges and brokers
Exchanges and brokers can differ in how they handle the buying and selling of cryptocurrencies.
Signing up and verifying your account
The process of signing up for a CEX or a broker is typically the same, requiring the user to provide personal information, such as full name, email address, phone number, and a password. And of course, there’s photo ID required.
Once your identity is verified, UK residents are required to complete an assessment to show they understand the risks associated with what crypto/investment they are about to buy, in accordance with local legislation. Additionally, they must wait for a 24-hour “cooling off” period, before their account is active, due to local regulations.
Brokers will also typically require their users to conduct a Know Your Customer (KYC) verification process when signing up.
Adding funds from an account
Depending on the exchange or broker, a user can deposit money into their account via several methods, including cards, bank transfers, or cryptocurrency transfers.*
Trading cryptocurrency
To trade on an exchange, you usually follow a user-friendly process of selecting the cryptocurrency asset you wish to trade, and choosing how much you want to trade. You may also set automatic buy and sell orders to avoid the need for constant monitoring of the exchange platform.
Since brokers often store cryptocurrencies on exchanges, they may charge uncompetitive fees and spreads when facilitating trades on third-party exchanges, as they need to cover their expenses, which include payments to the exchanges for executing trades.
Brokers may be a less protective option as they rely on other organisations to conduct trades and don’t generally tell their customers which exchanges they use, and where their cryptocurrency is being stored.*
How to decide on the best crypto exchange UK: Conclusion
Choosing a crypto exchange can actually be a positive experience if you know what you want to do with crypto.
If you are new to crypto and want to go with an exchange that is registered with local authorities and has good protection and fraud prevention, then a centralised exchange is probably right for you. You can factor into this that some exchanges like CoinJar have been in operation since 2013, and get good reviews on rating sites such as Trustpilot.
Choosing a broker means you have access to a greater range of cryptocurrencies, as they have partnerships with brokers who offer a vast array of cryptos. However, this can mean that you have to trust their judgement with your crypto.
As always, do your own research and choose an exchange or broker with good reviews and an established history before trading cryptocurrencies.
