To buy cryptocurrency, first you need to pick a broker or a reputable crypto exchange. While both avenues allow you to buy crypto, there are key differences between them to keep in mind.
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What Is a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. Exchanges often have relatively low fees, but they tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.
Some of the most well-known cryptocurrency exchanges are Coinbase, Kraken and Binance. While these companies’ standard trading interfaces may overwhelm beginners, particularly those without a background in trading stocks, they also offer user-friendly easy purchase options.
A host of Australian-based exchanges, such as CoinSpot, Independent Reserve, and Swyftx, allow users to purchase a range of cryptocurrencies with AUD, including through bank transfers or via BPAY in some instances. Make sure you research which exchange is best for you before signing up, particularly in regards to trading and transaction fees. Some other questions worth asking are:
- What security best practices does the exchange employ?
- Are cryptocurrencies on the platform held in a secure cold wallet?
- Does the platform have a helpful and easy-to-contact support team?
- Does it offer a wide variety of coins for trading?
- What are the terms and conditions?
As the failure of FTX highlighted, you should not assume all exchanges are employing security best practices, so it is critical to verify for yourself.
Australian crypto exchanges must be registered with AUSTRAC, and comply with Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) legislation. However, this requirement has more to do with preventing criminal syndicates from laundering money; it does not imply your coins will be protected. Cryptocurrency is not regulated by the financial watchdog, ASIC, although this could change in the near future under plans by the Australian Government.
The convenience of exchanges also comes at a cost, as the beginner-friendly options charge substantially more than buying the same crypto via each platform’s standard trading interface. To save on costs, you might aim to learn enough to use the standard trading platforms before you make your first crypto purchase—or not long after.
What Is a Cryptocurrency Broker?
Cryptocurrency brokers take the complexity out of purchasing crypto, offering easy-to-use interfaces that interact with exchanges on your behalf in exchange for a fee. Caleb & Brown is an example of a well-known crypto brokerage in Australia.
Others claim to be “free” while making money by selling information about what you and other traders are buying and selling to large brokerages or funds or not executing your trade at the best possible market price.
While they’re undeniably convenient, you must be careful with brokers because you may be restricted from moving your cryptocurrency holdings off the platform. With some, for example, you cannot transfer your crypto holdings out of your account.
This may not seem like a huge deal, but seasoned crypto investors prefer to hold their coins in crypto wallets for extra security. Most choose hardware crypto wallets that are not connected to the internet for the ultimate peace of mind and highest level of security.
