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Ask CryptoVantage: How Do I Take Crypto Off Binance, Coinbase?
The head of the U.S. Securities and Exchange Commission (SEC) has launched a crusade against centralized exchanges in the cryptocurrency sphere, staying true to his vow of taming the crypto space, which he has termed “the Wild West.”
Earlier this month, the SEC released two charges against Coinbase and Binance in a legal battle that is set to shape the future of cryptocurrencies. These developments mark a pivotal moment in the timeline of the digital currency industry, sparking debate among traders, policy-makers, and the cryptocurrency community at large.
However, it also underscores a powerful opportunity for cryptocurrency holders to reclaim control over their digital assets and move them to a private or self-custody solution.
In this era of regulatory scrutiny, understanding how to maneuver your cryptocurrency holdings from centralized exchanges to self-custody wallets becomes more than a strategic move – it’s a path to ensuring resilience and maintaining autonomy over your digital assets.
Here is a breakdown of everything you need to know when taking your crypto off centralized exchanges such as Coinbase or Binance.
Why Use a Private Wallet?
To begin with, crypto wallets are the equivalent of bank accounts in traditional finance. However, with crypto, you can go with a private wallet or an exchange wallet.
Centralized cryptocurrency exchanges like Binance or Coinbase host exchange wallets. The exchange creates a wallet when you create an account on these platforms to buy or sell cryptocurrencies.
This wallet is under their control, meaning the exchange handles the security, backup, and all technical details. However, it’s important to note that although you can access your funds, the exchange holds the private keys, not you. It’s like leaving your money in a bank – you trust them to secure your funds, but they have the ultimate control. There have been famous examples over the years (FTX, Mt.GOX, QuadrigaCX) of exchanges either going bankrupt or stealing their customer’s funds.
On the other hand, private wallets (also known as self-custody wallets) are where you store your cryptocurrencies outside of these centralized platforms.
With a private wallet, you’re the sole owner of the private keys needed to access your cryptocurrency. It’s akin to having a personal safe at home; you’re responsible for safeguarding your assets and private keys.
Choosing a Private Wallet
When it comes to digital assets, the best move is to choose a private wallet or a self-custody wallet.
A private wallet offers more control and privacy and is often recommended for people who want more direct control over their cryptocurrencies.
However, with great power comes great responsibility: if you lose your private keys, you lose access to your funds without any means of recovery.
The good news is that several private wallet solution providers offer tons of solutions for backing up and recovering your private keys. You can pick from popular and reliable vendors such as Ledger, Trezor, Tangem, and Exodus, MetaMask. The most secure private wallet is a hardware wallet (such as Ledger or Tangem) that hosts your private keys on an offline device but they cost money.
Setting Up a Private Wallet
You can either go with a software wallet such as MetaMask or a hardware wallet such as Trezor Model T. In either case, you will have full control over your private keys either on the hardware device or your computer.
After choosing a wallet, you will need to download the app or acquire the physical device and follow the manufacturer’s setup instructions.
During the setup process, you will be provided with a unique ‘private key,’ which will be stored securely on the device. This key serves as your digital signature and is the only means of accessing your funds, so it’s vital to keep it safe.
Once your wallet is set up, you can transfer your cryptocurrency from the exchange to your new private wallet using the ‘public address’ generated by your wallet.
Remember, maintaining a private wallet means you are solely responsible for the safety and security of your digital assets. Therefore, check and confirm that you are sending it to the right wallet address before confirming the transaction.
Withdrawing to Your Wallet
If you are withdrawing funds from Binance or Coinbase to your private wallet, follow these steps.
- Log into your Binance/Coinbase account and navigate to the ‘Wallet’ section. Here, select ‘Spot Wallet’ or the wallet where your cryptocurrency is stored.
- Locate the cryptocurrency you wish to withdraw and click on ‘Withdraw.’ If you can’t immediately see the currency, you can use the search function to find it.
- You will now need to enter the ‘public address’ of your private wallet. This is the address generated by your private wallet, which acts as the destination for your funds. Ensure that you carefully copy this address, as incorrect information can result in lost funds. Use copy/paste to avoid mistakes and double check.
- Enter the amount you wish to withdraw. Always double-check the amounts and the fees associated with the transaction.
- After confirming the details are correct, you can initiate the withdrawal. Depending on the network congestion and the currency in question, the transfer may take anywhere from a few minutes to several hours.
Once the transaction is completed, you can check your private wallet to confirm the received funds.
What Fees to Expect
Transferring cryptocurrencies from an exchange to a private wallet generally involves two types of fees: withdrawal fees from the exchange and network fees, also known as ‘gas’ fees.
Withdrawal fees are levied by the exchange itself for facilitating the transfer of assets out of their platform. These fees can vary greatly depending on the exchange and the specific cryptocurrency you’re transferring. Binance, for instance, charges a varying rate depending on the cryptocurrency you want to withdraw.
At the moment, Binance is charging a fee of about 0.0004BTC and 0.003ETH per transaction. Coinbase, on the other hand, does not charge its customers for spending USDC but charges a flat fee of 2.49% for withdrawing other cryptocurrencies. In terms of network fees, you can expect to pay negligible fees on most networks, with the exception of periods when the network is congested. Take care if you’re withdrawing Ethereum as network fees during certain times can be prohibitively expensive.
What to Do Once Your Crypto is on a Private Wallet
With your digital assets and cryptocurrencies safe in your private wallet, your next step is to ensure the ongoing safety of your assets. You can do this by backing up your wallet’s private keys or recovery phrases.
You can also go ahead and learn about staking or yield farming opportunities in DeFi (decentralized finance). Staking allows you to earn from your assets without giving up full control over your private keys. Also, be sure to keep your private wallet up to date.
Why You Still Need an Exchange
Going forward, you will still need an exchange for converting your fiat money to crypto through traditional currencies such as USD, EUR, and GBP, to mention a few.
You will also need an exchange for trading and diversification of your portfolio; you can also do this through decentralized exchanges such as Uniswap. Also, many centralized exchanges offer more user-friendly portfolio management platforms, and you can use some of their financial instruments to increase your crypto holdings.
Just remember to choose a reputable exchange and leave as little crypto on the exchange as possible.
