The 8-Point Check I Run on Any Exchange Before Funding It
By NorwegianSpark Editorial — written with AI assistance and reviewed by the NorwegianSpark SA editorial team | Last updated: 2026-08-08
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Regulation is a floor, not a guarantee. A licensed venue can still lose your money, and an unlicensed one can operate honestly for years. What separates outcomes is not the badge on the homepage — it is whether anybody checked.
These are the eight checks. They take about twenty minutes, they are all free, and every one of them has a specific failure mode behind it.
1. Which entity is serving you?
Large exchanges operate several legal entities. The one that onboards you depends on your residence, and it determines your protections, your available products and your recourse.
Find the entity name in the terms you are being asked to accept, not the one in the marketing. Then check it in the relevant regulator's register. This is the same failure mode as brokers — our sister site documents it in 11 broker red flags, point 2.
2. Does the licence cover what you are actually doing?
An authorisation to provide custody is not an authorisation to offer leveraged products or yield accounts. Check that the permission list covers the specific service you intend to use — the mismatch between "regulated" and "regulated for this" is where a lot of retail money has gone.
3. Who holds the assets, and are they segregated?
The question is not "is it a big exchange" but "if this entity fails tomorrow, is there a legally separate pool with my name attached to it?"
Look for: segregation of client assets, the custodian's identity, and whether the exchange lends out customer holdings. If the terms permit rehypothecation, you are a creditor, not an owner. Background: what happens if a crypto exchange collapses.
4. Proof of reserves — and proof of liabilities
Proof of reserves shows assets. On its own it proves very little, because assets without liabilities is half a balance sheet. An exchange can show large reserves and still be insolvent.
What is worth something: an attestation that covers both sides, performed by a named firm, with a stated methodology and a date. What is worth little: a wallet address and a screenshot.
5. Withdrawal terms, tested small
Read them, then test them. Deposit a small amount, withdraw it, and time the round trip before you fund the account properly.
This one check catches more problems than the other seven combined, because withdrawal friction is the earliest observable symptom of nearly every exchange failure in history.
6. Security posture, specifically
Not "do they mention security" — every site does. Specifically:
- Withdrawal allow-lists and a time-delay on new addresses.
Our guides: how to secure crypto holdings and crypto wallet security.
7. What happens to your assets if you stop paying attention?
Dormancy terms, inactivity fees, and — the one that catches people — whether products auto-roll. A yield product that automatically re-locks is very different from one that returns to your spot balance.
8. Where does the yield come from?
If the venue offers an earn product, this is the whole question. Any yield above the risk-free rate is being paid by someone, for taking some risk. If the page does not say who and what, the answer is you.
We wrote this one out in full: if you can't explain where the yield comes from, you are the yield.
The twenty-minute version
And the check that outranks all eight
Do not leave long-term holdings on any exchange. No amount of regulation changes the fact that an exchange balance is a claim on a company, while a self-custodied coin is not.
The practical split most experienced holders use: an exchange balance sized for what you are actively trading, and everything else in self-custody. Our guides: how to move crypto to self-custody, hardware wallet vs software wallet, best crypto wallets 2026 and how to set up a crypto wallet.
Venues we cover in depth, with the caveats in the reviews: Nexo (review), Eightcap (crypto CFD review) and Vantage (guide). Broader landscape in best crypto exchanges 2026.
Frequently asked
Is a regulated crypto exchange safe? Safer, not safe. Authorisation brings conduct, custody and disclosure obligations, and a regulator who can act. It does not guarantee your assets, does not cover market losses, and does not remove counterparty risk.
What is proof of reserves and is it enough? It is evidence of assets held. On its own it is not enough, because solvency depends on liabilities too. Look for an attestation covering both sides, by a named firm, with a stated methodology and a recent date.
How much crypto should I keep on an exchange? As a general principle, only what you are actively trading. Anything held for the long term carries unnecessary counterparty risk on an exchange and belongs in self-custody.
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Written with AI assistance and reviewed by the NorwegianSpark SA editorial team. NorwegianSpark SA, org. 834 984 172. Some links are affiliate links — see our disclosure. Not financial advice.
Sources
- EU — Regulation (EU) 2023/1114 (MiCA), authorisation and safeguarding obligations: eur-lex.europa.eu
Content on AICryptoCoin is for informational purposes only and does not constitute financial advice. Always do your own research and consult a qualified financial advisor before making investment decisions.