If you recently developed an interest in cryptocurrency investments then you may have come across the terms broker and exchange. Oftentimes, it is not clear which one would be right for us because the numerous sources on the internet can provide contradicting information. It is also common for ‘help’ blogs to suggest that new inverts should pick what they think is right for them. While it is true that someone writing a blog may not be able to pick the best option for you, it can be quite frustrating. This is because after long hours of research, you sometimes just want a black and white answer.

In this article, I will talk about the main difference between cryptocurrency brokers and exchanges, talk about the advantages of both, and also identify which option would be the best for new investors. So, carry on reading this article if you are looking for a brief yet clear answer to your initial queries.

Exchange vs. Broker

Verification Process

The signup process of both types of trading platforms is quite similar and easy. The major cryptocurrency exchanges close their sign-up feature when they have the maximum capacity of users. However, once there is room for new users, the signup process for them is fairly simple. Users have to create an account with their email address and password. They need to submit some KYC documentation such as a picture of you holding your ID card or a colored scanned copy of it. You will find that this verification process is not even necessary for some of the major exchanges such as Binance.

Brokerage firms have a simple account registration process where you have to just provide your email address and create a password. However, you have to verify your account with your KYC documents to buy and sell assets. The KYC documentation that brokers ask for is more complex than what you have to provide an exchange.


Brokers and exchanges differ a lot in terms of security. Regulated brokerage firms are easy to trust especially when they are regulated by authorities such as the FCA, SEC, CYSEC, and others. Brokers are strictly audited businesses that reduce the risk of misconduct with the user’s funds. And since brokers store the clients’ funds in banks and often in segregated accounts, your money is much safer with them.

Exchange platforms can be regarded as relatively unsafe. This is because, despite the 2 Factor Authentication systems, the security of your funds cannot be guaranteed. The cryptocurrency market is not regulated and so the number of scams disguised as cryptocurrencies is much higher. This is why it is recommended to store your assets on cryptocurrency hardware wallets outside the exchange once you have made a purchase.

Deposits and Withdrawals

The problem with using exchanges is that most of them don’t accept payments in fiat form. This means that to buy an asset, you first need to buy cryptocurrencies and pay using them. It is easy to buy cryptocurrencies for purchasing assets however the ease comes with high transaction fees and commissions.  With most exchanges, this fee is charged for every transaction that you make.

The stressful process for buying assets on an exchange is completely different from what brokers offer. With brokers, you can deposit money to your account using several different means of payment which automatically makes the task much simpler. You can do with the currency of your choice that the broker supports. While you don’t have to worry about the deposit fee when using brokerage firms, they do charge a small percentage on withdrawals. However, the process of depositing and withdrawing money is much cheaper than with exchanges.

Final Thoughts

After reading this article, I am sure that you have a clearer picture of the difference between a broker and an exchange. For dealing with assets as volatile as cryptocurrencies, it is better to use the OTC counters which exchanges provide. This suggestion is good for those people who are interested in investing in large trading volumes because OTC counters have more liquidity than brokers. However, if you want to start off in a more guided and supported way then, I would suggest that you find a brokerage firm. In simpler words, exchanges are good for people who are interested in making large investments while brokers are a good starting point for those who are trading on a budget.

The final decision ultimately is in your hands. If you are still confused about the one you should choose, then you should consider getting in touch with a financial manager.


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