To safeguard your cryptocurrency, protect three things: the private keys or seed phrase that control your coins, the accounts you log in to, and your judgement when a message asks you to act fast. Get those right and most losses are avoidable. Get them wrong and, in the UK, there is usually no compensation to fall back on.
Quick answer: how do you keep cryptocurrency safe?
Decide who holds the keys: an exchange or you. Keep only what you need on exchanges, write your seed phrase down offline and never share it, use passkeys or an authenticator app rather than SMS codes, and treat any unexpected request for money, codes or your phrase as a scam. UK compensation schemes rarely cover crypto.
Private keys and seed phrases: what you are protecting
A wallet does not store coins. It stores a private key, a secret that proves you may move the coins recorded on the blockchain. Anyone with the key can move them, and a completed transfer cannot be reversed.
Most wallets show the key as a seed phrase, also called a recovery phrase: usually 12 or 24 ordinary words that can rebuild the wallet on any device.
- Write it on paper, or stamp it on metal, when you create the wallet.
- Never photograph it or save it to a notes app or cloud storage.
- Keep a second copy in a separate secure place.
- Never type it into a website or chat. A genuine wallet asks for it only when you restore the wallet yourself.
Hot wallets, cold wallets and exchanges
“Not your keys, not your coins” is the oldest rule in crypto security. Leave coins on an exchange and the exchange holds the keys (custodial storage); hold the keys yourself and that is self-custody. A hot wallet is an internet-connected app, while a cold wallet keeps the keys offline, usually on a small hardware device.
| Factor | Exchange | Hot wallet | Cold wallet |
|---|---|---|---|
| Who holds the keys | The firm | You | You |
| Main risk | Firm fails, hack, frozen account | Malware, phishing | Lost device or phrase |
| Password reset | Usually | No | No |
| Suits | Active trading | Small sums | Longer-term holdings |
None is safe by default. Self-custody removes the firm but makes you the only line of defence, with no helpdesk if you lose the phrase.
What UK protections do and do not cover
Crypto is not protected like a bank account. The FCA’s consumer guide to the basics of crypto says it is highly unlikely you will be covered by the Financial Services Compensation Scheme (FSCS), and that you should be prepared to lose all your money.
- FSCS: highly unlikely to cover crypto losses, even when a platform fails.
- Financial Ombudsman Service: the FCA says its anti-money-laundering registration of crypto firms does not give customers access to the Ombudsman.
- Registration: not a recommendation or endorsement of a firm.
- Promotions: regulated. Expect prominent risk warnings; the FCA says a refer-a-friend bonus or free gift means the firm is breaking its rules.
UK crypto rules are changing, so check the FCA’s website before relying on this.
Lock down your accounts: 2FA and passkeys
Exchange accounts and the email behind them are a thief’s easiest way in. Give each a unique password from a password manager, so one leak does not open the rest.
The National Cyber Security Centre now recommends passkeys over passwords wherever they are available, because passkeys resist phishing. Where there is no passkey, turn on two-factor authentication (2FA) with an authenticator app rather than SMS codes, which a SIM swap can steal.
Phishing and common crypto scams
The FCA warns that scammers have become increasingly active as interest in crypto has grown. Most scams persuade you to hand something over rather than break any technology.
- Fake support: a “helpdesk” messages you and asks you to verify your wallet. Support never needs your phrase.
- Lookalike sites: type the address yourself or use a bookmark. A padlock only means the connection is encrypted.
- Wallet drainers: a site asks you to approve a transaction that lets it move your tokens.
- Recovery scams: after a loss, someone offers to get your coins back for a fee.
If you are scammed, tell your bank or exchange at once and report it to Report Fraud, which replaced Action Fraud in December 2025. The warning signs are the same ones in our guide to spotting a trading course scam.
A practical checklist to safeguard your cryptocurrency
- Decide how much stays on an exchange, and why.
- Move longer-term holdings to a wallet whose phrase only you hold.
- Write the phrase down offline, twice, and store the copies apart.
- Use a unique password plus a passkey or authenticator app on exchange and email accounts.
- Send a small test amount before a large transfer.
- Never share your phrase, codes or screen with anyone who contacts you.
Example, hypothetical numbers only: you hold £4,000 of cryptoassets and trade a small part. Keeping £400 on the exchange and £3,600 in a cold wallet means a hacked or frozen account puts 10 percent at risk, not all of it. How much to hold at all is a risk decision, the same one we cover when we build a rules-based risk model.
From the original guide (29 August 2024)
This guide was first published on 29 August 2024. The original author’s words that still hold up are kept below unchanged; product recommendations have been removed.
Owning cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), or Dogecoin (DOGE) means possessing a private key that gives you full control over your assets. This private key is your digital lifeline; anyone who gains access to it can take complete control of your crypto holdings. This decentralized nature means no bank, regulator, or even your mom can stop a thief from spending your hard-earned crypto. Once it’s gone, it’s gone.
- Practice Discretion. Keep a low profile about your crypto holdings, especially during bull markets when your assets might suddenly be worth more than expected. Avoid bragging about your wealth to minimize the risk of becoming a target for thieves. Remember, it only takes one moment of pride or complacency to lose it all.
Data breaches can expose your personal information, making you a target for hackers and scammers. If you find out your information has been leaked, change all usernames and passwords associated with affected services immediately. While Gmail and other platforms do a good job filtering out spam and phishing attempts, always be cautious.
If an email or website seems off, trust your instincts—don’t click on suspicious links or download unknown files. And never, under any circumstances, send money to strangers or provide sensitive information.
Common mistakes
- Keeping a seed phrase in a photo or cloud note. One breached account exposes the wallet.
- Relying on SMS codes alone. A SIM swap can take your number.
- Treating FCA registration as a safety net. It brings no compensation cover.
- Reacting to price spikes on unfamiliar platforms. Read what moves crypto prices each week first.
Frequently asked questions
Is it safe to keep crypto on an exchange?
It is convenient, but the exchange holds the keys, and if it fails or your account is taken over, UK compensation is highly unlikely. Many holders keep only what they actively trade there.
Is crypto protected by the FSCS?
The FCA says it is highly unlikely. FCA registration for anti-money-laundering purposes does not bring FSCS or Ombudsman cover either.
Will a wallet provider ever ask for my seed phrase?
No. You enter it only when you restore a wallet yourself, on its own app or device. Anyone who asks for it is trying to steal from you.
Is Bitcoin a bubble?
We gave our view in 2017 in our article asking whether Bitcoin is a bubble, and our guide to reading Bitcoin’s long-term market cycles covers its booms and busts. Either way, a stolen coin is lost at any price.
Next steps
If you trade crypto rather than just hold it, read our guide to price action trading on crypto with Bitcoin examples and our overview of the crypto-asset market. To learn the method, start with the free basics section of our price action trading course.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
