Buying Crypto Safely in the U.S.

More Americans are buying crypto than ever before. But regulations and security risks can make the process confusing. Here’s how to stay safe.

By
&
Tom Blackstone
Gabe TurnerChief Editor
Last Updated on May 10, 2022
By Tom Blackstone & Gabe Turner on May 10, 2022
The content on this page is provided for informational purposes only. Security.org does not offer financial or investment advice, nor does it advise or encourage anyone to buy, sell, or trade cryptocurrency. It is advised that you conduct your own investigation as to the accuracy of any information contained herein as such information is provided “as is” for informational purposes only. Further, Security.org shall not be liable for any informational error or for any action taken in reliance on information contained herein.

Cryptocurrency is quickly gaining ground in the U.S. According to research by the University of Chicago, over 13 percent of U.S. residents now own crypto, and 61 percent of these invested in it for the first time within the last six months.1

So if you’re thinking of investing in crypto, you’re in good company.

But you may wonder how you can buy crypto safely. Many crypto exchanges are located outside of the U.S. and aren’t subject to U.S. regulations. So you may wonder if these are safe to use.

Some exchanges even say that they don’t serve Americans. Should you use them anyway?

Did You Know: Some U.S. exchanges have been hacked for millions of dollars recently, including Crypto.com (although they’ve reimbursed users for the hack).2 So what can you do to protect yourself from fraud?

Before we dive in, just know that crypto isn’t nearly as unsafe to buy as it might first appear. There are several licensed, regulated crypto exchanges in the U.S. that offer their services in nearly every state. And the legitimate exchanges will usually reimburse you if your account is hacked due to a mistake made by the exchange.

But you’ll also need to ensure you don’t lose your crypto due to poor digital hygiene. Luckily, you can dramatically decrease your risk by practicing a few good security habits.

In this article, I’ll explain how to choose a secure U.S. exchange to buy your crypto from, what you need for identity verification, how to withdraw your crypto from the exchange and protect it once it’s withdrawn, and more. I’ll touch on everything you need to know to buy crypto safely and securely from within the U.S. So let’s get started.

Overview

To buy crypto safely in the U.S., you’ll have to take a number of pretty simple steps. Here is a summary of the process:

  1. Choose a secure exchange that fits your individual needs.
  2. Gather your documents and verify your identity.
  3. Make a purchase using a debit card or bank transfer.
  4. If you’re concerned about exchange hacks, withdraw and store your crypto in a wallet.
  5. Use, stake, or invest your crypto if desired.

In the following sections, we’ll go over all of these steps in detail. But for now, this is a basic outline of how to buy crypto securely.

Choosing a U.S. Exchange

We really dive deep into this topic in our guide to selecting a legitimate crypto exchange, but for context, Americans didn’t have many options for crypto exchanges until recently. Because the Financial Crimes Enforcement Network (FinCEN) requires exchanges to register as Money Services Businesses (MSMs) and verify the identity of every user, many crypto exchanges refused to accept cash deposits from U.S. residents.

But the U.S. is a huge market of potential crypto buyers. And over the past few years, many exchanges have decided to open U.S. branches to get access to this market.

As a result, there are now plenty of secure, regulated U.S.-based crypto exchanges to choose from. These include:

  • Coinbase
  • Binance.US
  • Crypto.com
  • Kraken
  • CEX
  • Coinmama
  • eToro and others

Given this variety of options, you may wonder how you can find the exchange that best suits your individual needs. So here are a few important factors to consider.

Dig Deeper: To learn more about crypto and the law, read our guide to U.S. crypto regulations, where we discuss the ins and outs of crypto regulation in the past, present, and into the future.

Security

If your exchange gets hacked, it may impose withdrawal limits on you. In extreme circumstances, it may even become insolvent and be unable to pay you back for the loss. This is what happened to users of Mt. Gox back in 2014.3

Today, most exchanges use a variety of standard practices to avoid this kind of catastrophic outcome. They keep 98 percent of their crypto on “cold wallets,” devices that aren’t connected to the internet, and they strictly limit employee access to these wallets to prevent internal theft. Oftentimes, these cold wallets are kept under bank vault-like security.

Most exchanges also have a contingency fund they can use to reimburse users if a hack occurs — because even a 1 percent loss can involve millions of dollars in a major exchange.

If an exchange doesn’t follow these industry standard crypto practices, you may want to avoid it altogether because the risk may not be worth whatever benefits the exchange provides.

Keep in mind that in this guide, we only discuss exchanges that follow these standard security practices.

Pro Tip: Be sure to check out our guide on how to protect your crypto for expert advice on securing your crypto from bad actors.

State or territory availability

Some U.S.-based exchanges are not available in all U.S. states. For example, aside from Coinbase, there are almost no crypto exchanges available in New York. eToro is also not available in Nevada, Minnesota, Puerto Rico, or Tennessee.

Regardless of which state or territory you live in, it’s a good idea to only use a crypto exchange that is legal in your state. Otherwise, you may run into trouble during identity verification. Or if you manage to pass verification with an old address, you may run into withdrawal holds if it is discovered in the future.

Coin selection

Nearly all crypto exchanges will carry at least Bitcoin and Ethereum. Most will also carry major cryptos like BNB, Tether, and Cardano. But if you want to buy coins from newer networks that haven’t quite caught on yet, you may want to use an exchange that has a larger coin selection.

In the U.S., the exchanges with the largest selections are Coinbase, Crypto.com, and Kraken. But other exchanges may suit you just as well, depending on which particular coins you want to buy.

Trading fees

Crypto exchanges tend to fall into two categories in terms of fees: beginner exchanges with higher fees and advanced exchanges with lower fees.

If you’re mostly a buy-and-hold investor that only does one transaction or so per week, fees might not be that important to you. In this case, you might be OK with a beginner exchange like Coinbase or Coinmama.

But if you’re a scalper or day trader who makes lots of transactions each day, you may want to consider a more advanced exchange that has lower fees, such as Binance.US or Kraken.

Pro Tip: Exchanges usually charge an extra 3 to 5 percent on top of the trading fees if you buy with a debit card. So if you can stand to wait for your crypto, it pays to use bank transfer instead.

Deposit and withdrawal methods

Exchanges vary in terms of how you can deposit cash into them or withdraw cash from them. For example, many exchanges require you to use wire transfer or ACH to make deposits and withdrawals. But an increasing number of them allow debit card purchases, and a few allow you to withdraw using PayPal.

Verification

All U.S. exchanges require you to verify your identity. But some have human beings reviewing verification requests, while others use automated verification systems. In general, the automated systems are more of a hassle to deal with than the human-based ones, as the computers tend to reject applicants for having blurry photos more often than the human-based services do. (Note that Binance.US and Crypto.com have strict verification systems.)

Did You Know: U.S. FinCEN has declared that cryptocurrency is “virtual currency,” not digital goods. This means it is treated more like real money and less like video game currencies, digital movies, or other types of virtual goods you can buy online. As a result, all U.S. crypto exchanges have to verify the identities of their users.

If you have trouble passing verification, exchanges are typically quite helpful in trying to get the problem sorted out. But you may need to talk to customer service through several emails before you can get approved. If you’re in a hurry, this may be a big pain.

Regardless of the exchange, most people can pass verification within a few days of signing up at the latest. More on identity verification in just a bit.

User interface

Some exchanges, like Coinbase and Coinmama, are known for their simple-to-use interfaces. Others, like Binance.US and Kraken, are known for having advanced order types, candlestick charts, and other features used by active traders.

The more complex interfaces can be frustrating to new users. For example, they may assume that you want to place a “limit order” to buy or sell at a particular price, even if this means you have to wait for the order to be filled.

What is a limit order?: On a cryptocurrency exchange, a limit order is an order to buy or sell at a particular price. If a limit order is entered at a price that is significantly different from the current price, it may take a long time to be filled or not be filled at all. By contrast, a market order is an order to buy or sell at whatever price is immediately available. Market orders are usually filled right away.

If you want to place a “market order” on one of the more advanced interfaces, you’ll need to specifically choose this option from a drop-down menu.

By contrast, the more beginner-friendly interfaces will fill your order automatically at whatever price is available. In fact, these interfaces don’t allow you to place “limit orders” at all.

If you don’t plan on using limit orders, stop-losses, or other advanced order types, you may want to use an exchange with a simple interface, or you may not care either way. It really depends on how much time you are willing to spend learning how to use the interface.

On the other hand, if you do plan on using advanced order types, you’ll probably want to avoid the exchanges that don’t offer them.

List of secure U.S. exchanges

Below is a list of some of the most secure and safe cryptocurrency exchanges in the U.S. Each of these exchanges are licensed as MSMs with FinCEN and require identity verification. So they’re all legal for the U.S. in general.

These exchanges also have a record of minimizing risks by keeping most of their crypto in cold wallets, and they have either never been hacked or have agreed to reimburse users for whatever hacks have occurred.

For each exchange, I’ve also provided some basic info about the factors discussed above.

The Most Secure U.S. Crypto Exchanges

Exchange States Available Coin Selection Trading Fees Deposit and Withdrawal Methods User Interface Verification Difficulty
Coinbase All except Hawaii 9,000+ $0.99-$2.99 or up to 1.49% ACH, wire transfer, debit card, Paypal Beginner Easy
Crypto.com All except New York 150+ 0.4% or less ACH, wire transfer Advanced Moderate
Binance.us 44 U.S. States 60+ 0.5% or less ACH, wire transfer, debit card Advanced Moderate
Kraken All except Washington and New York 100+ 0% – 0.26% per trade or up to 1.4% for instant buys Wire transfer “Choice of beginner or advanced” Easy
CEX.io 31 U.S. states 30+ 0.25% ACH, wire transfer, debit card Choice of beginner or advanced Easy
Coinmama All except Hawaii and New York 9 coins 2.93% – 3.9% Wire transfer, ACH, debit card, Apple Pay, Google Pay Beginner Easy
Gemini All states, plus D.C. and Puerto Rico 70+ $0.99 – $2.99 + 0.5% for orders under $200 or 1.99% for over this amount. ACH, wire transfer Beginner Easy, but some users have complained of delays
eToro 45 U.S. states, D.C., and three territories 20+ coins 0.75% – 4.9%, depending on the coin ACH, wire transfer, debit card Beginner Easy

Verifying Identity

At any U.S. exchange, you’ll need to verify your identity before you’ll be allowed to withdraw crypto or cash. On some exchanges, you won’t even be able to deposit until you pass verification.

Pro Tip: If you’re new to crypto trading, you might want to check out our review of Coinbase. It’s really user friendly and has a great UI. If you’re more experienced, though, read our Binance.us review. It offers a lot of advanced trading tools to help you out.

To make the process go as smoothly as possible, you’ll want to get your driver’s license ready and make sure you have a mobile device with a decent camera available to use.

As soon as you log in, most exchanges will spam you with messages telling you to get verified and will provide you with a link to do this. In most cases, you won’t need to go hunting for the verification button. But if for some reason you can’t find it, it’s usually under settings somewhere on the top-right or top-left of the screen.

The exchange will ask you for your legal name, address, and phone number.

After this, you’ll be prompted to download the exchange’s mobile app to complete the process. If you don’t want to use the mobile app, you may be able to upload your photos instead, but it’s generally easier to complete the process on a phone.

You’ll be asked to take a picture of the front and back of your driver’s license or state-issued ID. Once you’ve uploaded your driver’s license photos, some exchanges will ask you to take a selfie.

FYI: You may need to hold up a sign with today’s date on it or the name of the exchange when taking the picture. This will be used by the reviewer to check whether you are the same person whose photo is on the license.

Once you’ve submitted all of your information, you should get a response within a few hours. You’ll receive an email in your inbox telling you whether you passed or failed.

If your verification gets rejected, the most common reason is because of a blurry photo. If this happens, just try again. Sometimes it takes more than one attempt to pass.

Levels of verification

Some exchanges have multiple levels of verification. If so, you’ll be able to trade, deposit, and withdraw after finishing the basic process. But there may be limits to how much crypto you can trade or withdraw in a day.

If you aren’t a high-volume trader, you probably won’t notice these limits. But if you’ve got a lot of capital you plan to invest, you may want to go ahead and get a higher level of verification.

You can typically get approved for a higher level by providing proof of address (such as a utility bill or bank statement) and by filling out forms that explain the source of your savings.

Pro Tip: If you need to withdraw a large amount of cash or crypto from an exchange, you may be required to provide proof of address and proof of origin of funds. So make sure you’ve got a utility bill or bank statement handy.

Once you’ve passed verification, it’s time to make a purchase.

Purchasing Crypto

Keep in mind that different exchanges have different interfaces for making a purchase.

If you’re using a more beginner-friendly exchange, the process should be straightforward. Just click on the coin you want to buy, and select your payment method.

Debit cards

Debit cards are the fastest way to buy crypto. If you buy crypto with a debit card, you can usually withdraw it into a wallet and use it or invest it immediately. But debit cards also have extra fees associated with them. If you’re not going to use your crypto right away, you might want to use ACH or wire transfer instead.

ACH

If you don’t want to pay debit card fees, the second most convenient method of payment is Automated Clearing House (ACH). You can link a bank account to your exchange app and use it to make a “deposit” to the exchange. The cash will show up in your account when the deposit clears in a few days, and you can then use this balance to buy crypto.

Did You Know: On some exchanges, you can even do an “instant buy” with ACH. This locks in the token price the moment you submit the order. The crypto shows up in your account, and it is tracked in your portfolio as if you truly own it. But you can’t withdraw it to a wallet until it clears. Once the transfer for an instant buy is cleared through the banking system, you can withdraw the crypto to your wallet as normal.

Also note that banks place limits on how much cash you can transfer through ACH. These range from $2,000 to $25,000, depending on the particular bank you’re using. If you want to buy more than the limit your bank allows, you can use wire transfer to make a deposit instead.

Wire transfer

You can use wire transfer to deposit as much cash as you want. Your bank will likely charge you a small fee to use this method, so it’s best for large transactions.

You cannot use wire transfers for instant buys. So if you’re trying to get into a crypto at a particular price, you may want to use some other purchase method that is faster.

Advanced interfaces

If your exchange has a more advanced interface aimed at serious traders, it may be a little more complicated to make a purchase. You may need to select an “order type” such as “limit,” “market,” “stop-loss,” etc., and wait for your order to be filled.

In this case, if you just want to buy crypto at the immediately available price, you can select market from the order-type drop-down menu.

You’ve purchased crypto, now what?

So now that you’ve got your crypto coins, it’s time to figure out what to do with them.

If you’re an active trader, leaving your crypto in the exchange may be the most convenient option for you. But if the exchange gets hacked, your crypto may be subject to withdrawal holds. This may cause you to lose access to it for a period of time while the exchange figures out what is going on.

If you’re more of a buy-and-hold investor, you might not want to deal with this potential hassle. So you may want to withdraw your crypto into your own possession instead of leaving it in the care of others.

If you plan on using your crypto to stake and earn returns, deposit into a DeFi app, play blockchain video games, or for any other purpose other than storage, you’ll generally need to withdraw it into your own possession first.

In the next section, we’ll explain how to withdraw your crypto so that it is no longer in the possession of your exchange.

Pro Tip: If you want to take a deeper dive and learn more about crypto investing, be sure to read our guide on investing in crypto safely.

Withdrawing & Storing Crypto

If you want to use your crypto or store it in such a way that you have complete control over it, you’ll need to securely withdraw it into a wallet.

A wallet is a piece of software that stores your private key, a string of characters that controls your crypto. When you try to send crypto to another person or deposit it into an exchange, your wallet uses this key to send an encrypted message that proves you are the owner of the account.

Did You Know: In cryptography, a private key is a string of characters that can be used to encrypt messages. When a message is encrypted with a private key, only the corresponding public key can be used to decrypt it. Cryptography junkies have used private keys for decades to prove their identities to each other. In cryptocurrency, your private key is used to prove you are the owner of a crypto account. More on this in our rundown of crypto keys and passwords.

If you have your crypto securely stored in a wallet, only you, the key holder, can spend it. This means that no one can hack your account using an email address and/or password (since there isn’t one). The only way an attacker can get access to your wallet account is by stealing your private key.

A wallet account also cannot be hacked by circumventing the computer network itself. This is because a blockchain network is made up of multiple computers spread across the world, each of which has a complete copy of the database. This means that it has no single point of failure that an attacker can breach.

Here’s how to securely withdraw your crypto and store it in a wallet:

  • Choose a wallet that works with your network. Different networks use different wallets, so it’s important to choose one that works with the network your coin exists on.

    For example, Electrum is a popular wallet for the Bitcoin network and can be used to store BTC. But it doesn’t work with Ethereum. Most Ethereum users rely on Metamask to store their ETH. But Metamask can’t hold Bitcoin, etc.
  • Download the wallet from the official website. Lots of scammers create fake wallets to lure in unsuspecting crypto users. If you download a fake wallet and send your crypto to an address it creates, the scammer will probably have access to the private key for this address. This means they will be able to steal your crypto.

    The safest way to avoid this scam is to only download wallet software from the developer’s official site.
  • Write down your seed words and store them safely. When you first open a wallet, it will display your seed words, a series of words that can be used to generate your private keys for all of your accounts. You can use these to recover your crypto accounts if you lose your password or your device crashes.

    Write these down on a piece of paper and store the paper in a safe place where it can’t be destroyed or discovered by someone else.
  • Choose a strong password. Once you withdraw your crypto, no one should be able to steal it without hacking your personal device. But as an added security measure, your wallet will encrypt your private keys with a password.

    This way, if an attacker does break into your device somehow, they will find that your key has been turned into gibberish they can’t use.

    If you want to make your crypto even more secure, you can choose a long password with capital and lowercase letters, numbers, and special characters. This way, it is much less likely that an attacker will be able to use hash cracking software to guess your password.
  • Don’t give out your seed words to anyone. Anyone who has your seed words has access to all of your crypto. If you are concerned that you might die and leave your family without access to your crypto, you might want to tell a family member the location of your paper backup.

    But aside from this person, anyone who asks you for your seed words is probably trying to steal your crypto. This includes any websites you may visit.

    Your wallet will ask for your password frequently. This is because it needs your password to decrypt the key stored on your device (to turn it from gibberish into something readable). But once it is installed and set up, it will never ask for your seed words.

    If you forget your password, you can uninstall and reinstall your wallet to recover access to your account. In this case, you’ll need to re-enter your seed words. But this is the only time it will ask you for it.
  • Withdraw your crypto using your address. Once you’ve got your wallet set up, you’ll see a string of characters called an address. If someone wants to send you crypto, you can give them your address as the location to send it to. A person cannot use your address to withdraw from your account. It’s “deposit only.”

    To withdraw your crypto from the exchange, go into the send/receive or withdrawsection of your exchange’s app. Enter the amount of crypto you want to withdraw. Then copy your address from your wallet and paste it into the exchange’s address field.

    It’s safest to use the copy-and-paste method instead of trying to hand-type the address. This is because, if you mistype even one character of the address, your exchange will send your crypto to the wrong account on the blockchain. If this happens, your crypto will be lost forever!

    Once you tell the exchange to transfer your crypto to your wallet address, it will broadcast a transaction to the network. You’ll be able to see this transaction by pasting your address into a block explorer like Etherscan or Blockchain.com. Your exchange may take a few minutes to do this though, so don’t worry if you don’t see it right away.

    When the transaction is confirmed by the network, your crypto will appear in your wallet balance.

    Fun Fact: Your wallet address is your public key run through a hash function or hashed. Hashing is a cryptographic technique used to prove that a message has not been tampered with. In this case, it’s simply used to save memory on the blockchain, as the hash is shorter in length than the public key. Learn more in our crypto wallet guide.

Congratulations, you’re now the proud owner of cryptocurrency.

Wrapping Up

So that’s how to buy crypto safely in the U.S.

Remember these basic steps to buying crypto on the up and up:

  1. Choose an exchange that is legal in the U.S. and accepts U.S. deposits.
  2. Verify your identity.
  3. Use a debit card, ACH, or wire transfer to buy crypto.
  4. Transfer your crypto to a wallet to avoid exchange hacks.
  5. Protect your seed words and private key.s

That’s all there is to it.

U.S. residents do face more hurdles than residents of other countries when it comes to buying crypto — so much so that you might even need to look into if crypto is legal in your state. That said, it’s also gotten much easier than it used to be, and most Americans will have no trouble getting their hands on some crypto by following these simple steps.

Want to learn more about the ins and outs of investing in crypto? If so, check out our guide to everything cryptocurrency. There you’ll find everything you need to know to take your crypto game to the next level.

Citations
  1. NORC. (2021). More Than One in Ten Americans Surveyed Invest in Cryptocurrencies. norc.org/NewsEventsPublications/PressReleases/Pages/more-than-one-in-ten-americans-surveyed-invest-in-cryptocurrencies.aspx

  2. The Verge. (2022). Crypto.com admits over $30 million stolen by hackers. theverge.com/2022/1/20/22892958/crypto-com-exchange-hack-bitcoin-ethereum-security.

  3. Investopedia. (2022). Mt. Gox. investopedia.com/terms/m/mt-gox.asp.