Should You Use a VPN When Trading Cryptocurrency and Bitcoin?

If you‘re involved in buying, selling or trading cryptocurrency, protecting your digital assets and maintaining your privacy is of utmost importance. Cryptocurrency transactions may seem anonymous, but the reality is there are still ways your identity and crypto activities can be traced if you‘re not careful.

This is where using a virtual private network (VPN) comes in. A VPN adds an essential layer of security and privacy that every crypto trader should have. In this guide, we‘ll dive into the reasons you need a VPN for cryptocurrency trading and what features to prioritize when choosing a crypto-friendly VPN provider.

The Risks of Trading Crypto Without a VPN

While transacting with cryptocurrency offers certain privacy advantages over traditional fiat currency, there are still notable risks to consider:

Cryptocurrency Is Not Fully Anonymous

A common misconception is that crypto trading is completely anonymous. In reality, cryptocurrencies like Bitcoin provide pseudonymity rather than true anonymity.

While you don‘t have to reveal your real-world identity to transact, every transaction is recorded on an immutable public ledger (the blockchain). Transactions can be traced back to the originating crypto wallet address. And if that wallet can somehow be linked to your actual identity, your entire crypto transaction history could be exposed.

Additionally, most crypto exchanges now require identity verification to comply with Know Your Customer (KYC) regulations. So the exchange likely has your personal information on file.

Cryptocurrency Hacks and Theft Are Increasing

Since cryptocurrencies only exist digitally, they are an attractive target for hackers and thieves. Tactics like cryptojacking malware and phishing attacks aimed at stealing private keys are increasingly common.

In 2022, hackers stole a staggering $1.9 billion worth of cryptocurrency in just the first 6 months of the year. That puts 2022 on pace to be the biggest year ever for crypto hacking losses.

Without proper security measures, crypto held in online wallets or on devices connected to the internet is at risk of being stolen through hacking and malware.

Scammers Are Creating Fake Crypto Exchanges and Wallets

Another risk crypto traders need to be aware of is spoofed websites posing as legitimate crypto exchanges and wallets. These convincing fakes may prompt you to enter your private keys or login credentials, which are then stolen by the scammers.

Fake crypto schemes promoting unrealistic returns have also proliferated as crypto has gained mainstream appeal. Scammers lure people in and then abscond with their funds.

The key is to only use reputable, established crypto platforms like Coinbase and Binance. But even then, using a VPN adds important security and privacy protections.

5 Reasons Every Crypto Trader Needs a VPN

Here are the top benefits of using a virtual private network for your cryptocurrency trading activities:

1. Access Geo-Restricted Crypto Exchanges

Cryptocurrency regulations vary widely around the world. Some countries, like China, Egypt, Iraq, Qatar, Oman, Morocco, Algeria, Tunisia, and Bangladesh have banned crypto trading entirely. Many others have partial restrictions.

If you‘re traveling or live in a country where access to global crypto markets is restricted, a VPN can help. It allows you to connect to a server in a crypto-friendly location, masking your real IP address and geographic location.

This allows you to bypass any government-imposed restrictions and access your preferred international crypto exchanges and related websites.

2. Shield Your Transactions from Snooping

When you connect to a VPN, it creates a secure encrypted tunnel between your device and the VPN server. This prevents your Internet Service Provider (ISP), government agencies, hackers, or any other third parties from monitoring your online activity.

The VPN hides details about the websites you visit and the data you transmit. So if you‘re visiting crypto exchanges, trading, or checking your wallet balances, that activity is shielded from prying eyes.

This is especially important if you ever need to conduct crypto transactions on a public Wi-Fi network. These shared networks are notorious for being insecure, but a VPN will encrypt your data and keep it protected even over public Wi-Fi.

3. Maintain Privacy from Crypto Exchanges

While a VPN can‘t make you fully anonymous on crypto exchange platforms where you‘ve completed identity verification, it can limit how much personal data the exchange collects about you.

Without a VPN, the exchange can see your IP address, your geographic location, details about your device, and your internet service provider. It may keep logs of your login activity, trading patterns, and more.

A reputable VPN prevents the exchange from seeing your real IP address and location. If the VPN adheres to a strict no-logs policy (more on this later), there won‘t be records of your crypto trading activity. This gives you more privacy, even when using KYC-compliant exchanges.

4. Protect Against Malware and Phishing Attacks

As noted earlier, crypto traders are increasingly targeted with malware designed to steal their cryptocurrency holdings. Phishing messages may also try to trick you into revealing your private keys or login credentials.

Many leading VPN providers now offer built-in malware protection and block suspicious phishing websites. This adds an extra layer of security to protect you and your digital assets.

Of course, you should still practice good digital hygiene and never open attachments or click links from unknown sources. But a VPN acts as a second line of defense.

5. Avoid Triggering Transaction Blocks or Delays

If you‘ve ever had a crypto transaction declined or delayed after logging in from a new geographic location or IP address, you know how frustrating it can be. These security measures are designed to prevent fraudulent transactions, but they can disrupt legitimate trading activity too.

With a VPN, your IP address and location are masked. So you can connect to your usual crypto platforms without triggering security alerts, even if you‘re traveling or logging in from a new network. This allows you to manage your crypto holdings seamlessly around the world.

What to Look for in a Crypto VPN Provider

Now that you understand the importance of using a VPN for crypto trading, how do you choose the right VPN provider? Here are the key features to prioritize:

No-Logs Policy

For maximum privacy, your VPN provider should have a strict policy against keeping logs of your activity. This means it does not track which websites you visit, how long you stay connected to the VPN, how much data you use, or your original IP address.

A no-logs policy ensures your crypto activities can‘t be traced back to you based on VPN records. Even if the government subpoenas the VPN company, there are no logs that could identify you or your transactions.

Strong Encryption Standards

Look for a VPN that offers military-grade AES 256-bit encryption. This is virtually impossible to crack and is the same encryption standard used by government agencies and militaries around the world.

Strong encryption scrambles your internet traffic into an unreadable code, so no one can decipher your data even if they somehow manage to intercept it.

Kill Switch

Occasionally, your connection to the VPN server may drop. Without a kill switch feature, your internet traffic would immediately revert to your regular unencrypted connection, leaving you exposed.

A kill switch detects any disruption to the VPN connection and instantly cuts off all internet connectivity until the secure VPN connection is restored. This way, your real IP address or online activity is never revealed, even if the VPN disconnects unexpectedly.

Leak Protection

VPN leaks are another potential vulnerability to be aware of. In some cases, your operating system may default to your regular DNS settings instead of the anonymous DNS servers provided by your VPN. Or, WebRTC technology embedded in some browsers may reveal your true IP address to certain websites.

Top VPN providers offer DNS leak protection and WebRTC leak blocking to prevent your data from being exposed in these scenarios. Make sure the VPN you choose offers this.

Putting It All Together

With the rise of cryptojacking, malware, phishing scams, and tracking by ISPs and governments, it‘s clear that using a VPN is essential for cryptocurrency trading. It hides your identity and location, shields your activities from snooping, and protects you from common cyber threats.

While a VPN isn‘t a magic bullet, it‘s one of the simplest and most effective ways to improve your security and privacy while transacting with cryptocurrency.

When selecting a crypto VPN, make sure it has a verified no-logs policy, uses strong encryption, and offers a kill switch and leak protection. With these features in place, you can trade with greater confidence knowing your data and crypto holdings are secured.