Are Crypto Exchanges Insured? | What Your Money Actually Gets

Most crypto exchange balances aren’t insured like bank deposits; protection is usually limited to eligible cash held at partner banks and narrow legal programs.

You log into an exchange and see a neat number next to your Bitcoin, your stablecoins, and your “cash” balance. It feels bank-like. The risk is that it isn’t bank-like.

Insurance in crypto is real in some narrow lanes, fuzzy in others, and flat-out absent in many. The trick is separating marketing words (“insured,” “protected,” “safeguarded”) from the legal coverage that pays out when a firm fails.

This guide explains what is and isn’t insured at crypto exchanges, how coverage works in plain language, and what to verify before you leave meaningful funds on any platform.

What “Insured” Means In Crypto Exchange Terms

When people ask if an exchange is insured, they often mean one of four different things. Each has a different answer.

• Deposit insurance for cash: This is the bank-style protection that can apply to eligible fiat cash held at an insured bank, under the right account setup.
• Brokerage protection: In some countries, brokerage accounts can have a backstop if the broker fails, with limits and rules.
• Private crime insurance: Some platforms buy policies meant to cover certain theft events. These are private contracts with exclusions and caps.
• Operational “security” claims: Cold storage, audits, and controls are useful, but they aren’t insurance payouts.

So the real question becomes: which balance are you talking about—cash, crypto, tokenized assets labeled as securities, or something else?

Why Most Exchange-Held Crypto Isn’t Insured Like A Bank

Bank deposit insurance is built for deposits at banks. Most crypto exchanges are not banks. If you hold crypto on an exchange, you’re usually holding a claim under that exchange’s terms, not a protected bank deposit.

That’s why many consumer protection schemes don’t apply when a crypto firm freezes withdrawals, enters insolvency, or mismanages assets. If the exchange fails, customers may end up as creditors in a legal process, and recovery can depend on how the platform kept records and segregated assets.

Some exchanges try to bridge this gap by parking customer cash at insured banks, or by running a separate regulated affiliate for certain products. Even then, protection can apply to the cash at the bank, not the crypto on the platform.

Cash Balances: When Deposit Insurance Might Apply

If your exchange offers a “USD balance” (or EUR/GBP equivalent), that balance may be held at a partner bank, or it may be a claim on the exchange itself. Those are not the same.

In the U.S., the closest thing to bank-style protection is FDIC deposit insurance, which can apply to eligible customer funds held at an FDIC-insured bank when the accounts and recordkeeping meet the rules for pass-through coverage. The FDIC explains how pass-through coverage works for certain fiduciary or custodial arrangements in its guidance on pass-through deposit insurance coverage.

Two practical points matter:

1. Who holds the money: If the cash is actually on deposit at an insured bank (not just a line item on an exchange ledger), you may be closer to eligible coverage if the setup qualifies.
2. How it’s titled and tracked: Pass-through treatment generally depends on clear account titling and records that map each customer to their share.

Even with that setup, deposit insurance is about bank failure. It doesn’t automatically pay because an exchange fails, pauses withdrawals, or gets hacked.

Crypto Balances: What Usually Happens In A Failure

For crypto itself—BTC, ETH, stablecoins, and most tokens—there is usually no government-backed insurance that makes you whole if the exchange collapses or loses assets.

Your outcome often turns on details that are easy to miss when you sign up:

• Custody structure: Are assets held in omnibus wallets, segregated wallets, or a mix?
• Ownership language: Do the terms describe you as the owner of specific assets, or do they treat your balance as an unsecured claim?
• Use of customer assets: Is the platform allowed to lend, rehypothecate, or pledge assets tied to your balance?
• Record quality: Clean, verifiable records matter when courts decide what belongs to whom.

These are not small-print trivia. They shape whether you’re treated like a customer getting property back, or a creditor waiting in line.

Brokerage-Style Protection: Limited, And Often Not For Crypto

Some consumers assume “brokerage rules” apply to crypto exchanges. In the U.S., investor protection for broker-dealers is tied to the Securities Investor Protection Act (SIPA) and SIPC. The catch is that SIPA/SIPC coverage is designed for securities accounts, not for most spot crypto holdings.

The SEC’s Division of Trading and Markets spells out that certain crypto assets that are investment contracts are not treated as SIPA “securities” and are not protected by SIPC when they aren’t part of a registered securities offering; see the SEC’s FAQ on crypto-asset activities and distributed ledger technology.

What that means in real life: even if a platform has a regulated affiliate, your spot crypto balance may sit outside the set of assets a brokerage backstop would cover.

UK And EU Style Schemes: Don’t Assume FSCS Covers Exchange Balances

In the UK, people often look for FSCS coverage. For most cryptoasset activity, FSCS coverage generally doesn’t apply in the way it does for protected deposits or certain regulated investments.

The FCA is explicit that being registered as a cryptoasset business is not the same thing as customers getting FSCS or ombudsman coverage; see the FCA page on the cryptoassets AML/CTF regime.

The FSCS also explains that cryptoassets generally aren’t protected and describes the risks on its page Cryptoassets – are they covered, and what’s the risk?

Across Europe, schemes vary by country and product type, so the safest default is simple: treat exchange-held crypto as uninsured unless you can point to a named legal scheme that clearly applies to your exact product and jurisdiction.

Coverage Types You’ll See And What They Usually Mean

Platforms often use “insured” in ways that sound reassuring while staying vague. This table separates the common claims from what they tend to cover in practice.

Table 1 is placed here so you can compare protections after you’ve got the basics, before you start checking a specific exchange.

What You See Claimed	What It Often Covers	What It Often Doesn’t Cover
“FDIC insured cash”	Eligible fiat deposits held at an insured bank under a qualifying custodial setup	Crypto holdings; losses from exchange failure if cash wasn’t actually on deposit at the bank
“SIPC member” or “brokerage protection”	Securities and some cash in a brokerage account if the broker fails (subject to SIPA/SIPC rules)	Most spot crypto; unregistered crypto investment contracts
“Crime insurance”	Some theft events, sometimes limited to certain storage systems and defined incidents	Account takeovers, social engineering, insider events, or large exclusions; full-balance guarantees
“Cold storage”	Risk reduction through offline key storage	A payout program; it’s a control, not coverage
“Proof of reserves”	Snapshot-style evidence of certain on-chain assets at a point in time	Liability completeness, off-chain obligations, or a guarantee of segregation
“Segregated accounts”	Operational separation of certain assets (varies by platform and jurisdiction)	Automatic legal protection in insolvency if terms allow reuse or commingling elsewhere
“Regulated” or “registered”	Usually AML registration or specific licensing scope	Deposit insurance or compensation scheme coverage for crypto balances
“Stablecoin is safe like cash”	Price targeting mechanism (if it holds), plus issuer-specific reserve practices	Guaranteed redemption, bank deposit insurance, or exchange insolvency protection

Are Crypto Exchanges Insured? What Coverage Really Exists

So, are crypto exchanges insured? Some parts of the experience can be covered, but the coverage is narrower than most people assume.

Here’s the plain version:

• Exchange-held crypto: Usually not covered by government deposit insurance or broad investor compensation schemes.
• Fiat cash parked at partner banks: May be eligible for deposit insurance if the account structure and records meet the rules, and the triggering event is bank failure.
• Broker-dealer programs: Can exist for securities accounts, but most spot crypto sits outside that perimeter.
• Private insurance: May exist, but it’s not standardized and often doesn’t cover the events people worry about most.

If you want a single mental model: treat exchanges like financial platforms with partial guardrails, not like insured banks.

How To Verify Claims On A Specific Exchange

Marketing pages can be polished and still leave you guessing. Verification means finding the legal language and mapping it to your actual balance.

Step 1: Split Your Balance Into Buckets

Write down your balances in three buckets:

• Fiat cash: USD/EUR/GBP “cash” or “funds” balance.
• Spot crypto: Coins and tokens you can withdraw on-chain.
• Yield or lending products: Earn, staking, rewards, lending, or similar programs.

Coverage, if any, differs by bucket. Yield products often add counterparty risk, plus contract terms that can change your claim in insolvency.

Step 2: Find The Exact Legal Entity Holding Your Funds

Exchanges often run multiple entities. Your account might be with one entity, while banking services are provided by another. Look for the entity name in your account terms, not just the brand name in the app.

Step 3: Read The “Custody” And “Title” Language

Scan for phrases like “custodial,” “trust,” “for the benefit of,” “segregated,” “commingled,” “rehypothecation,” “lending,” and “security interest.” You’re trying to answer one question: does the platform treat your crypto as your property held on your behalf, or does it treat your balance as a claim it owes you?

Step 4: Verify Bank Deposit Details If Cash Is Claimed As Insured

If the platform claims deposit insurance for cash, look for:

• The partner bank name and whether it is an insured bank in your jurisdiction.
• Account type (custodial, omnibus, pooled, trust, or similar).
• How balances are recorded (whether customer-by-customer records exist for pass-through treatment).

If the platform can’t clearly answer where your cash sits and under what account structure, treat the “insured” label as unproven until you can confirm it.

Step 5: Check If Any Investor Compensation Scheme Applies

In the U.S., use the SEC’s guidance as your anchor for SIPA/SIPC boundaries on crypto activities. In the UK, treat FCA registration for AML as a sign of registration scope, not a promise of FSCS coverage for cryptoasset losses.

Private Insurance: What It Can Cover, And The Common Gaps

Some exchanges buy commercial policies. These can be worth having, but they’re not a blank check.

Common features you’ll see:

• Coverage caps: A policy limit may be far smaller than total customer assets on the platform.
• Defined incidents: Coverage may apply only to certain theft types from defined storage systems.
• Exclusions: User credential theft, phishing, SIM swaps, and “authorized” withdrawals often sit outside coverage.
• Claims process friction: Even valid claims can take time, and the insurer can dispute facts or apply exclusions.

A useful way to read these claims: private insurance can soften specific loss events, but it usually doesn’t remove insolvency risk.

What Moves Your Risk Down Fast

You can’t force a platform to become a bank, but you can choose setups that cut the most common failure modes.

Keep Less On The Exchange

If you’re holding crypto for months, self-custody removes exchange insolvency risk from that portion of your holdings. It adds key management risk, so it’s not “free,” but it shifts the threat model into something you control.

Use Two-Factor Authentication That Resists SIM Swaps

Authenticator apps or hardware security keys can cut account takeover risk. SMS-based codes are easier to intercept.

Prefer Platforms With Clear Custody Disclosures

Look for plain-English custody descriptions, segregation practices, and transparency about what happens in a failure. If terms are murky, your legal position can be murky too.

Separate Trading Funds From Long-Term Holdings

Many people keep a small “trade stack” on an exchange and move the rest off-platform. That reduces exposure while still letting you act quickly when you want to trade.

Practical Checklist Before You Leave Real Money On Any Exchange

This is the fast screen you can run in ten minutes. It’s not a guarantee, but it catches the big holes.

Table 2 is placed here so you can run a final check after you’ve read the rules, before you commit funds.

Check	What You Want To See	Red Flag
Cash location	Named insured bank partner and clear account structure	“Insured” claim with no bank name or account details
Custody terms	Clear language on ownership, segregation, and withdrawal rights	Terms that treat balances as unsecured claims or allow broad asset use
Product type	Spot holdings separated from lending/yield products	Assets automatically swept into lending or yield without clear opt-in
Security posture	Strong account security options and clear incident policy	Weak 2FA options or vague incident handling
Regulatory scope	Specific licensing details for your jurisdiction and product	“Registered” used as a blanket trust signal
Insurance wording	Policy scope described with limits and exclusions	Broad “insured against hacks” phrasing with no specifics
Withdrawal behavior	Consistent withdrawals and clear status pages during stress	Frequent pauses, long delays, or sudden policy changes

Common Scenarios And The Straight Answer

If The Exchange Gets Hacked

A private policy might cover part of a loss, but it depends on the incident type and the policy terms. Government deposit insurance generally won’t pay out for stolen crypto on an exchange.

If The Exchange Goes Bankrupt

Crypto balances are typically handled through the insolvency process. Outcomes vary based on custody structure, terms, and recordkeeping. If you had fiat cash parked at a partner bank under a qualifying structure, deposit insurance can still be tied to a bank failure event, not the exchange failure itself.

If You Lose Money From A Phishing Attack

That is often treated as an authorized withdrawal after account takeover. Many private policies and platform promises don’t cover user-side credential compromise.

If You Hold A Token That Acts Like A Security

Some products sit closer to securities rules, but that doesn’t automatically mean a compensation scheme applies. In the U.S., SIPA/SIPC boundaries still matter, and the SEC’s FAQ is a useful anchor for how crypto-related activity fits inside or outside those programs.

What To Do If You Want “Insured-Like” Exposure Anyway

If your goal is to keep volatility exposure while staying closer to traditional guardrails, you have a few paths:

• Hold less on exchanges: Use exchanges as on-ramps and trading venues, not long-term vaults.
• Keep fiat at insured banks: Use your bank for idle cash and move funds to exchanges only when needed.
• Use products with clear legal wrappers: If you’re using crypto-related securities products, verify the exact account type and who the custodian is.

No option removes risk fully. The goal is to pick the risk you can live with, then shrink it with better custody and better habits.

Final Takeaways You Can Act On Today

If you only remember three things, make them these:

1. Most exchange-held crypto isn’t insured like a bank deposit.
2. Deposit insurance, when it applies, is usually about eligible cash held at insured banks under the right structure.
3. Verification beats vibes. Find the legal entity, read custody terms, confirm where cash sits, and treat vague “insured” language as marketing until proven.

Run the checklist, keep long-term holdings off-platform if you can, and treat exchanges as tools you use—not vaults you trust by default.