SideBySideCrypto
Security December 18, 2025

Crypto Exchange Insurance: Are Your Funds Protected?

The truth about crypto insurance—what's covered, what's not, and why "not your keys, not your coins" still matters.

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Quick Summary

Your crypto is NOT FDIC insured—only USD balances (up to $250K). Exchanges carry private insurance against hacks, but coverage limits and terms vary. If an exchange goes bankrupt (like FTX), you're an unsecured creditor. Gemini and Coinbase have the strongest insurance programs among US exchanges.

The Hard Truth About Crypto Insurance

⚠️ What You Need to Know

  • • FDIC does NOT cover crypto — Only US dollars held in partner banks
  • • SIPC does NOT cover crypto — Only applies to securities, not digital assets
  • • Bankruptcy = you lose — FTX users lost billions when it collapsed
  • • Private insurance is limited — Usually covers hacks, not insolvency

Insurance Coverage by Exchange

Exchange USD Insurance Crypto Insurance Coverage Type
Gemini FDIC $250K $200M+ policy Hack, theft, employee fraud
Coinbase FDIC $250K $320M+ policy Hack, theft
Kraken FDIC $250K Undisclosed Internal reserves
Binance.US FDIC $250K SAFU fund Emergency fund
Crypto.com FDIC $250K $750M policy Cold storage only

What Each Type of Insurance Covers

FDIC Insurance (USD Only)

FDIC insurance protects your US dollar balance if the exchange's partner bank fails. It does NOT protect against the exchange itself failing.

Covered:

USD balance up to $250,000 per depositor, per bank

NOT Covered:

Any crypto holdings, exchange bankruptcy

Private Crypto Insurance

Major exchanges carry private insurance policies from Lloyd's of London and other insurers. Coverage is typically for hacks, theft, and internal fraud.

Usually Covered:

External hacks, employee theft, security breaches

NOT Covered:

Exchange insolvency, your own security mistakes

Hot vs Cold Wallet Coverage

Insurance often only covers crypto in cold storage (offline). Hot wallets (online, for trading) may have different or no coverage.

Example: Coinbase insures hot wallet holdings up to 2% of total crypto, with different limits. Cold storage has higher coverage. Terms aren't always publicly disclosed.

What Happens in Bankruptcy?

The FTX collapse taught us a brutal lesson: when an exchange goes bankrupt, your crypto becomes part of the bankruptcy estate.

  1. 1. Trading halts — You can't withdraw or trade
  2. 2. Assets frozen — Your crypto is locked in bankruptcy court
  3. 3. You're an unsecured creditor — Behind secured debt, taxes, employees
  4. 4. Recovery takes years — FTX users waited 2+ years for partial returns
  5. 5. You may get pennies on the dollar — Or nothing at all

How to Protect Yourself

  1. 1
    Self-custody large holdings

    Move significant amounts to your own hardware wallet. "Not your keys, not your coins."

  2. 2
    Use multiple exchanges

    Don't keep everything on one platform. Diversify counterparty risk.

  3. 3
    Choose regulated exchanges

    US-based, licensed exchanges have more regulatory oversight than offshore platforms.

  4. 4
    Monitor proof-of-reserves

    Some exchanges publish audited proof-of-reserves. Check if yours does.

  5. 5
    Watch for warning signs

    Withdrawal delays, communication problems, leadership changes—don't ignore red flags.

Exchange Security Practices

Exchange Cold Storage % SOC 2 Proof of Reserves Never Hacked
Gemini 95%+ ✓ Type 2 ✓ Audited ✓
Kraken 95%+ ✓ ✓ Audited ✓
Coinbase 98% ✓ Public company ✓
Binance.US Undisclosed ✗ Limited ✓
Crypto.com 100% cold ✓ ✓ Audited ✗ (2022)

Frequently Asked Questions

Is my crypto FDIC insured on Coinbase? +
No. Your USD balance is FDIC insured up to $250,000 through their partner banks. Your crypto is NOT FDIC insured—it's covered by Coinbase's private insurance policy against hacks/theft only.
What if my exchange gets hacked? +
Major exchanges carry insurance against hacks. If insured funds are stolen, the insurance should cover losses. However, coverage limits apply—a massive hack might exceed coverage, leaving some users partially compensated.
Should I keep crypto on an exchange? +
For active trading, keeping some crypto on exchanges is practical. For long-term holdings, self-custody (hardware wallet) is safer. Many people use a hybrid approach—trading funds on exchange, savings in cold storage.
Which exchange is safest? +
No exchange is 100% safe. Gemini and Kraken have the strongest security reputations—SOC 2 certified, never hacked, significant insurance coverage. Coinbase is publicly traded with regulatory oversight. But even the "safest" exchanges carry counterparty risk.

The Bottom Line

Your crypto is not insured like a bank account. Exchange insurance covers hacks, not bankruptcy. Gemini and Coinbase have the strongest insurance programs. For maximum security, self-custody significant holdings. Keep only what you need for trading on exchanges—and never more than you can afford to lose.

Compare All Exchanges