Is my crypto insured if the exchange fails?

Updated August 18, 2026 · Zion Labs US

Answer

Almost certainly not, in the sense the word is usually meant. FDIC deposit insurance covers deposits at an insured bank, and the FDIC states that it does not apply to crypto assets and does not protect against the default, insolvency or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers and wallet providers. SIPC covers cash and securities held by customers of a failed SIPC-member brokerage, limited to $500,000 including $250,000 for cash, and SIPC states that it does not protect any digital or crypto asset that does not qualify as a security. Anything else a platform calls insurance is a commercial policy whose terms decide who may claim under it.

Nuances and considerations

  • Two different failures are being confused. FDIC insurance responds when an insured bank fails. If a platform holds customer dollars at a partner bank, those dollars may be covered on a pass-through basis when that bank fails. The tokens are not deposits, and the platform itself failing is not an insured event under either scheme.
  • SIPC coverage turns on two conditions at once, and most crypto platforms fail both. The firm has to be a SIPC-member broker-dealer, and the asset has to be a security under the Securities Investor Protection Act. SIPC states that a digital asset security which is an unregistered investment contract does not qualify, even if a member firm holds it, and that no digital or crypto asset that is not a security is protected at all.
  • The word “insured” is itself regulated. The Federal Deposit Insurance Act prohibits representing or implying that an uninsured product is FDIC-insured and prohibits knowingly misrepresenting the extent and manner of coverage. The FDIC issued its 2022 advisory to insured banks precisely because crypto companies were telling customers they would be covered if the crypto company failed.
  • Private crime or specie insurance is a policy on the platform, not on you. Whether it responds depends on the loss types covered, the limit, the exclusions, and who is named as insured. Those terms are agreed between the insurer and the platform rather than published to customers.
  • The question that actually decides the outcome is a custody question. Whether the assets were held for you or transferred to the company, and whether they were segregated, determines your position in an insolvency far more than any insurance line does.
  • This describes US schemes. Other jurisdictions run different compensation arrangements, and the entity you contract with may not be in the country you assume. This is general information rather than legal or financial advice.

What to check when a platform says “insured”

  1. Insured against what event: the failure of a bank, the failure of the platform, or theft from a hot wallet?
  2. Who is the named insured, the platform or the customer?
  3. If FDIC coverage is mentioned, which insured bank holds the money, and does the covered balance mean the dollars or the tokens?
  4. Is the platform a SIPC-member broker-dealer, and is the specific asset a security registered with the SEC?
  5. What is the policy limit, and how does it compare with total customer balances rather than yours?

Sources

  1. Fact Sheet: What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies · Federal Deposit Insurance Corporation Supports: That FDIC deposit insurance does not apply to crypto assets, that it only covers deposits held in insured banks and savings associations, and that it does not protect against the default, insolvency or bankruptcy of any non-bank entity including crypto custodians, exchanges, brokers, wallet providers and neobanks.
  2. What SIPC Protects · Securities Investor Protection Corporation Supports: That SIPC protects cash and securities held by a customer at a financially troubled SIPC-member brokerage firm, that the limit is $500,000 including a $250,000 limit for cash, that a digital asset security which is an unregistered investment contract does not qualify as a security under SIPA even if held by a member firm, and that SIPC does not protect any digital or crypto asset that does not qualify as a security.
  3. FIL-35-2022: Advisory to FDIC-Insured Institutions Regarding Deposit Insurance and Dealings with Crypto Companies · Federal Deposit Insurance Corporation Supports: That some crypto companies misrepresented that crypto products were eligible for deposit insurance or that customers would be insured if the crypto company failed, and that the Federal Deposit Insurance Act prohibits representing or implying that an uninsured product is FDIC-insured or knowingly misrepresenting the extent and manner of coverage.
  4. Pass-through Deposit Insurance Coverage · Federal Deposit Insurance Corporation Supports: That deposits placed by a third party at an insured bank can be insured on a pass-through basis to the underlying owners where the ownership, account designation and recordkeeping conditions are all met, which is the route by which customer dollars at a platform may be covered even though tokens are not.

The regulator that publishes the correct answer to this question also publishes the reason it had to: firms kept stating the opposite. See the Crypto & Fintech AI-Readiness Index.

If an engine describes your custody model wrong, that is a compliance exposure rather than a marketing one. GEO →