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Cryptocurrencies are gaining increased momentum among individual investors and institutional players, with the recent launch of Bitcoin and Ethereum exchange-traded funds (ETFs) marking a new era in digital asset investment.
As these ETFs attract billions in investment, the total market capitalization of the crypto sector has held steady above $2 trillion for most of 2024. This rapidly growing interest may signal that digital assets aren’t only here to stay but are becoming a major force in the financial world.
While the potential for high returns is appealing, it’s important to approach crypto investments with the same level of caution as traditional assets. Although it’s impossible to guarantee complete security for any financial account, leveraging features like two-factor authentication (2FA) and selecting a secure exchange can help protect your investments. Whether you’re a seasoned crypto investor or just getting started, here are some things to consider to help keep your crypto investments safe.
Activate two-factor authentication
Two-factor authentication can add an extra layer of security to your account by requiring a code or confirmation from another device during the login process. This additional step can help reduce the risk of unauthorized access, even if your password is compromised or a company breach occurs.
When evaluating cryptocurrency exchanges and wallets, consider those that offer multiple two-factor authentication options. For instance, exchanges like Gemini provide several secure 2FA methods. These options range from the straightforward but potentially less secure SMS option to more robust solutions like authenticator apps such as Authy, hardware security keys and Passkeys, which utilize cryptographic credentials for enhanced protection.
No matter which method you choose, the key is to activate 2FA on all your crypto exchange accounts and wallets. Consider using different 2FA methods for each account to prevent a single point of failure.
Use passkeys for enhanced security
While strong passwords and 2FA are important steps to take for crypto security, passkeys may offer an additional layer of protection. Unlike passwords, which can be vulnerable to phishing and hacking, passkeys use cryptographic keys — unique codes for encryption — stored on your device to authenticate your identity and give you access to your account.
Passkeys streamline security by combining two factors into one process:
- Something you have: Your device, like a smartphone or hardware security key.
- Something you are: Biometric data like a fingerprint or facial recognition, or something you know, like a device PIN.
Cryptocurrency exchanges like Gemini use passkeys for 2FA, as this combination can help significantly improve security. Attackers would need both your physical device and a way to bypass biometric or PIN authentication, making it significantly more difficult to hack into your account. With support and integration from major platforms like Microsoft, Apple and Google, passkeys are quickly emerging as a new standard in digital security.
Look for compliance and certifications
No account, whether with a crypto exchange or traditional bank, is entirely risk-free. However, choosing a crypto exchange that aims for security can help significantly mitigate many potential threats. Since the platform you choose will be the custodian of your assets, its security protocols and regulatory compliance are important factors to consider. Here are some key aspects to keep in mind:
- Regulatory compliance: Look for exchanges regulated by authorities like the U.S. Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC) or the New York State Department of Financial Services (NYSDFS). These regulators enforce comprehensive standards for cybersecurity, capital reserves and operational transparency, helping protect user funds and verify the legitimacy of the exchange.
- Transparency: Transparency can also be essential for trust in a crypto exchange. For example, Gemini offers real-time data on assets and audited financial statements and operates as a full-reserve exchange, meaning customer funds are fully backed and can be withdrawn at any time. A high level of transparency can help boost security and build confidence.
- Reputation: Assess the exchange’s reputation by reviewing customer feedback, its security track record and any history of legal or regulatory issues.
- SOC certification: Exchanges with System and Organization Controls (SOC) 1 Type 2 and SOC 2 Type 2 certifications have undergone rigorous audits to meet the highest industry standard for financial controls and data security practices. SOC 1 helps ensure accurate financial reporting, while SOC 2 focuses on user data security and privacy. Several exchanges, including Gemini, have earned these certifications, which can offer added confidence that your assets and data are being protected.
- KYC Verification: Verify that the exchange enforces Know Your Customer (KYC) protocols. These procedures require users to verify their identity before trading, helping to prevent fraud, money laundering and other illegal activities. KYC can help enhance platform security and may also contribute to a safer trading environment.
Gemini, for instance, adheres to rigorous standards set by the NYSDFS, which require strict cybersecurity measures, capital reserve mandates and banking compliance standards. Gemini also offers offline cold storage with multi-signature technology — meaning assets are physically disconnected from the internet and require multiple keys for transactions.
Diversify storage options
While it may be convenient to keep all your assets in one exchange or a single wallet, diversifying where you store your crypto may help reduce the risk of total loss or theft. Consider using a combination of hot wallets, which are connected to the internet, and cold storage options, which are offline.
For example, some crypto investors might keep some of their crypto in an exchange for active trading or transactions while storing the rest in an offline cold storage device, like a hardware wallet. This way, even if one storage option is compromised, your entire portfolio isn’t at risk.
When managing your assets outside of an exchange, it may be wise to maintain multiple secure backups of your private keys and seed phrases. Private keys are strings of characters that allow access to your crypto, while seed phrases are 12- to 24-word phrases that can restore your wallet in case of loss or damage. Store these backups in a secure location, like a fireproof safe or safety deposit box. Losing them can result in permanent loss of your crypto assets when using a self-custodial approach.
Stay informed, vigilant and protected
Although no account is ever 100% secure, there are numerous simple steps you can take to keep your crypto investments as safe as possible. Stay informed about the latest security threats and best practices for protecting your crypto assets. Use security features like two-factor authentication and passkeys when available. Regularly update software and avoid clicking on suspicious links or sharing sensitive information that could be phishing attempts.
Cryptocurrency moves fast, and having a team of security professionals working to help keep your assets safe can feel reassuring. Exchanges like Gemini may provide added security protocols through its regulatory compliance and insurance coverage. Remember to stay vigilant and consistently practice smart security habits. Doing so can help keep your crypto investments protected.