Does Your Crypto Exchange Offer Insurance?
A quick overview of how exchanges secure funds
Crypto centralized exchanges have become increasingly popular in recent years as more people enter the world of cryptocurrency trading. However, with the rise of crypto exchanges has come a corresponding rise in security threats and hacking attempts. In response, many exchanges have started offering insurance policies to protect their users’ funds in case of theft or loss due to hacking or other security breaches.
In this article, we will take a closer look at some of the top exchanges that offer insurance policies.
Coinbase offers:
- Crime insurance that protects a portion of digital assets held across in Coinbase storage systems against losses from theft, including cybersecurity breaches
- One-time reimbursement for up to $1,000,000 (U.S. Dollars) of actual losses that you sustain due to a compromise of your Coinbase Account login credentials when you have active Coinbase One subscription.
- Insurance for up to $255 million for coins held in hot wallets backed by Lloyd’s registered broker Aon.
- Cash deposit insurance for all US dollar deposits stored in USD wallets on Coinbase by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
- 98% of its funds in an offline hardware wallet, with the remaining 2% is stored on the exchange for liquidity.
Binance offers:
- Cash deposit insurance for all US dollar deposits stored in USD wallets on Binance by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
- Binance Futures insurance fund that protects bankrupt traders from adverse losses and ensure that the profits of winning traders are paid out in full.
- Specie insurance coverage by Arch syndicate at Lloyd’s of London
- An overwhelming majority of client cryptocurrency funds are stored in cold wallets
- SAFU (Safe Asset Fund for Users) which is an emergency insurance fund valued at more than US$1 billion and it is funded by 10% of the revenue from trading fees. This fund is used to insure users’ assets in the case of a security breach on Binance’s website.
Crypto.com offers:
- 100% of user cryptocurrencies are held offline in cold storage with Ledger Vault.
- Cash deposit insurance for all US dollar deposits stored in USD wallets on Crypto.com by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
- Total insurance coverage of USD $750M backed by Arch Underwriting at Lloyd’s Syndicate 2012, for cold storage assets held on Ledger Vault., against physical damage or destruction, and third-party theft.
Gemini offers:
- Commercial crime and specie insurance for Digital Assets in their custody online hot wallet and Gemini Custody.
- Cash deposit insurance for all US dollar deposits stored in USD wallets on Binance by the Federal Deposit Insurance Corporation (FDIC) up to a maximum of $250,000.
- $200 Million in cold storage insurance coverage for certain types of crypto losses.
- Offline storage for the majority of their crypto, in an inaccessible, air-gapped system, which is geographically distributed and requires multiple employees to operate.
- Hot storage coverage under the protection of a FIPS 140–2 Level 3 rating or higher, and is insured.
BitGo offers:
- Insurance coverage for digital assets held in its custody, up to a maximum of $100 million. The coverage is provided by Lloyd’s of London and covers losses due to theft or hacking of the BitGo platform.
Bitbuy offers:
- Insurance coverage for digital assets held in its custody, up to a maximum of $100 million. The coverage is provided by Knox, a Canadian insurance company, and covers losses due to theft or hacking of the Bitbuy platform.
Kraken offers:
- Insurance coverage for digital assets held in its custody, up to a maximum of $100 million. The coverage is provided by a consortium of leading insurance companies and covers losses due to theft or hacking of the Kraken platform.
When evaluating insurance policies offered by centralized crypto exchanges, there are several key questions that should be considered:
- Does the exchange hold the majority of the funds in a hardware wallet?
- Does the exchange offer insurance for funds in hot wallets?
- Is the exchange FDIC insured for cash deposits
- Does the exchange offer any additional layer of insurance to protect its customers
- What kind of events does the insurance cover?
It is important to note that the availability and scope of insurance coverage can vary between exchanges and may be subject to certain terms and conditions. It is always recommended to carefully review the insurance policy and terms before using an exchange that offers insurance.
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Disclaimer: The information provided in this article is for educational and informational purposes only and should not be construed as financial advice.
