At the height of the crypto frenzy, a comparison between Binance and FTX would have extolled the virtues of two extremely popular exchanges. Today it is a very different story. FTX has collapsed and the SEC has made serious accusations against Binance. Binance remains one of the biggest cryptocurrency exchanges in the world and it plans to defend itself against the SEC's charges. All the same, we recommend staying away from Binance and Binance.US while this shakes out. It's too early to tell if it is at risk of collapse, but FTX customers learned the hard way that you can't move your assets after a platform fails. And given the limited consumer protections in crypto, if your assets are on exchange that fails, there are no guarantees you'll get them back.

Even though Binance is one of the biggest crypto exchanges in the world, the charges from the SEC present serious challenges and it isn't clear what will happen. The legal proceedings could take some time to play out and in the meantime, the exchange remains active. It is losing clients, and some investors fear it will fail. Others, particularly outside the U.S., are not worried by the regulatory issues and will continue to use Binance.

All the same, the company's regulatory situation is impacting its ability to function. Binance.US announced on June 13 that it would become a "crypto-only" exchange. This means customers won't be able to deposit or withdraw U.S. dollars. The international exchange is facing similar challenges with payment providers.

At this point, one big difference between FTX and Binance is that Binance has been able to meet customer withdrawal requests. In contrast, when customers started to panic and withdraw funds from FTX, there wasn't enough ready cash. This quickly sparked panic -- similar to a bank run -- and caused the exchange to collapse.

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In the case of FTX, it has become clear that the exchange did not implement the types of controls one might expect from a company dealing with billions of dollars of other peoples' money. John J. Ray III, the CEO appointed to oversee the bankruptcy proceedings, told the House Financial Services Committee, "Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever."

FTX highlighted a huge issue for crypto investors: We don't always know what is going on behind the scenes at centralized cryptocurrency platforms. Given that there's very little regulation and limited consumer protection, this is problematic.

In light of the SEC charges and the revelations about what went on at FTX and other failed crypto platforms, it isn't a surprise that many are wondering how safe it is to invest in crypto. Buying cryptocurrency is extremely risky.

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The SEC advises investor caution when it comes to crypto and has filed charges against several crypto platforms. It says that a number of popular cryptocurrencies -- such as Solana, Cardano, and Polygon -- are unregistered securities. This could impact the way these and other cryptos are traded in the U.S. As a crypto investor, make sure you understand how the SEC cases and proposed regulatory changes could impact your portfolio.

Risks in buying cryptocurrency include:

• Cryptocurrencies themselves: Cryptocurrencies are extremely volatile and there are no guarantees that they will succeed in the long term. Blockchain technology does have huge potential, but there's still a risk that even big cryptocurrencies like Bitcoin will collapse completely.
• The regulatory environment: Increased crypto regulation will almost certainly bring with it increased consumer protection, but it may also have a significant impact on the industry. Some fear stricter regulation could stifle the cryptocurrency market completely.
• Cryptocurrency exchanges and platforms: Not only can centralized cryptocurrency exchanges go bankrupt, they can also be targeted by hackers. Unlike money held in a bank, cryptocurrency assets are not protected by FDIC insurance. If a crypto platform fails, customers will often be at the mercy of the bankruptcy courts.

In short, there are much safer ways to build wealth. One route is to maximize your tax-advantaged contributions, by using a 401(k) or an individual retirement account (IRA). Try to build a diversified portfolio that contains stocks and bonds as well as other assets. There are no guarantees with the stock market, but historically, over time, the S&P 500 has generated decent returns.

That isn't to say crypto can't have a place in your portfolio. You might opt to allocate a small percentage of your portfolio to risky options like crypto, but it needs to be part of a wider, long-term investment strategy. It's also important to only invest money you can afford to lose. Use a trusted cryptocurrency exchange and consider keeping your assets in a crypto wallet that you control. Check out our list of top cryptocurrency exchanges for more.

FTX was the highest profile of several cryptocurrency platforms that failed in 2022. Many investors with money on the exchange will struggle to get any of it back. Plus, the high levels of interconnectedness between platforms mean that when one crypto company collapses, it can pull others down with it. If Binance -- one of the biggest crypto exchanges in the world -- fails, it is hard to know how big the ramifications might be.

As a result, the crypto world is sensitive to any issues that might topple this crypto giant. The various regulatory and legal issues faced by the exchange are serious, but so far it does not seem to be at risk of an FTX-style collapse. Unfortunately, if Binance does follow in FTX's footsteps, it could happen extremely quickly. That's why it makes sense to move your assets to a different crypto exchange or a crypto wallet that you control.