Episode Details

This story was originally published on HackerNoon at: https://hackernoon.com/protection-funds-insurance-and-fdicsipc-what-actually-covers-what.
Crypto held on an exchange is not FDIC or SIPC insured. Here is what protection funds such as Bitget's and Binance SAFU cover and how to verify them.
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Crypto held directly on an exchange is not covered by FDIC deposit insurance or SIPC brokerage protection, because those programs are built for bank failures and broker-dealer failures rather than for the insolvency of a crypto platform, and pass-through FDIC coverage on partner-bank cash never extends to the Bitcoin or Ether sitting beside it. What exchanges offer instead is a protection fund, a corporate reserve set aside to absorb defined security incidents, which can be a meaningful backstop but is not a statutory entitlement. Binance's SAFU was funded from trading fees and was actually drawn on after the 2019 breach. Bitget's Protection Fund launched in 2022 at $300 million with a committed floor at that level, published recurring valuations averaging $346 million in June 2026 alongside a separate monthly proof-of-reserves program. Coinbase takes a third route as a listed company filing Deloitte-audited financials with the SEC. The size of a fund matters less than what it covers, who controls it, how often its value is disclosed, whether it is segregated from operating capital and whether it has ever been used, so the right question is not whether an exchange is insured but which assets are protected against which event under which legal framework.