My exchange says deposits are FDIC insured. Is that true?

Read it very carefully, because there is a real version and a misleading version. The real version: some platforms hold customers' US dollar balances at partner banks, and those dollars may be covered if the bank fails. The misleading version implies your crypto is covered, or that the platform itself is insured. Neither is true. The FTC published an alert about exactly this claim , and the FDIC has ordered firms to remove misleading statements.

What about SIPC — does that cover me?

No. SIPC replaces missing securities and cash at a failed member brokerage, up to $500,000 including $250,000 in cash. Cryptocurrency is not a security for these purposes and crypto exchanges are not SIPC members. SIPC also does not cover losses from an investment falling in value, which is a separate misunderstanding people bring to it.

Does an exchange reserve fund protect me?

Partially, and only for what the fund is stated to cover. Several large platforms maintain a self-funded reserve intended to absorb losses from specific incidents such as a security breach. It is the platform's own money, allocated at the platform's discretion, not a policy you are a beneficiary of. It offers nothing against the platform becoming insolvent through its own bad decisions — which is what has historically cost customers the most.

Is anything at all protected?

In some jurisdictions, fiat currency balances held by a regulated firm must be safeguarded in segregated client accounts, which is a real protection distinct from insurance. It varies enormously by country and by licence type. Check what your platform says about client-asset segregation for your specific entity — and check whether the entity serving you is the licensed one.

Is my crypto insured? The short answer is no

If you grew up never having to wonder whether your bank might lose your money, the mental model you are bringing to an exchange is the wrong one. The gap between them is the risk.

This question comes almost exclusively from readers who grew up with deposit insurance, and that is exactly why it needs a careful answer. If you have never had to think about whether your bank might lose your money, the mental model you are bringing to a crypto exchange is the wrong one, and the gap between the two is the entire risk.

What the two protection schemes actually do

	FDIC deposit insurance	SIPC protection
Protects against	An insured bank failing	A member brokerage failing
Covers	Deposits — cash in accounts	Securities and cash held at the brokerage
Limit	$250,000 per depositor, per insured bank, per ownership category	$500,000 including up to $250,000 cash
Does not cover	Investments losing value; anything issued by a non-bank	Investments losing value; assets that are not securities
Crypto on an exchange	Not covered	Not covered

The FDIC's own list of products it does not insure is worth two minutes of your time, because it also clears up several adjacent misconceptions — mutual funds, stocks, annuities and safe-deposit contents are all outside it too. Crypto assets are simply one more item on a list that has always existed.

Both schemes exist to solve the same historical problem: people withdrawing en masse because they could not tell a healthy institution from a failing one. Neither was designed to protect anyone from their investment going down, and neither has been extended to cover crypto held on an exchange.

Why the distinction between "insured" and "safeguarded" matters

There is a real protection that is often confused with insurance, and it is worth separating because it does actual work.

In several regulated regimes, a firm holding client money must keep it segregated from the firm's own funds — in a separate account, not usable for the firm's operations. If the firm fails, segregated client money is meant to be returned to clients rather than absorbed into the estate.

That is not insurance. There is no fund topping it up if the money is missing. It is a rule about where the money must sit, and it depends on the firm having followed it. The 2022 failures are, in large part, the story of what happens when client assets were not treated that way.

So the question worth asking a platform is not "am I insured", which will get you a marketing answer. It is: which legal entity holds my assets, in which jurisdiction, under what licence, and are client assets segregated? That has a documented answer or it does not, and either result tells you something.

What exchange reserve funds are

Several major platforms maintain a reserve fund intended to cover customer losses from specific incidents — a security breach being the usual stated purpose. These are publicly disclosed, sometimes prominently: when we looked at Binance's own signup page in August 2026 it displayed a figure of one billion USDC for its reserve fund, alongside a wallet address, directly beneath the registration form.

That is a real disclosure and it is worth reading precisely rather than as reassurance.

These are genuine and they have been used. They are also frequently misunderstood in three ways:

It is the platform's money, not a policy. You are not a named beneficiary and you have no claim on it. Its use is at the platform's discretion.
It covers stated incidents, not all losses. A fund created to cover security breaches does not cover the platform becoming insolvent through its own trading or lending decisions — historically the more expensive failure by a wide margin.
Its size is relative. A fund that sounds large in isolation may be small against total customer balances. The comparison that matters is the ratio, not the headline figure.

None of that makes reserve funds worthless. A platform with one has made a visible commitment that a platform without one has not. Just do not file it mentally under the same heading as deposit insurance, because it does a much narrower job.

The four claims you will see, ranked by how much they mean

Marketing in this area is careful rather than false, which makes it harder to read. Here is what each formulation is actually asserting.

What it says	What it means	Weight
"USD balances held at FDIC-insured partner banks"	Your dollars, at a partner bank, may be covered if that bank fails. Your crypto is not covered and the platform itself is not insured.	Real but narrow
"Assets held in segregated client accounts"	Client money is kept separate from the firm's own funds, under a licence condition. Not insurance, but it is the protection that matters most in an insolvency — provided the rule was followed.	The strongest of the four
"Covered by a reserve fund"	The platform has set aside its own money against specific incidents, at its own discretion. You are not a named beneficiary.	Modest
"Assets are insured"	Usually a commercial policy covering the custodian against particular events such as theft from cold storage, with limits and exclusions. Read what is covered; it is rarely what a reader assumes.	Depends entirely on the policy

Notice that none of the four protects you against the failure that has cost customers the most: a platform that becomes insolvent through its own lending or trading decisions. That risk has no insurance product attached to it anywhere in this industry.

Why deposit insurance exists at all, and why crypto has none

Worth understanding, because it explains why this gap is unlikely to close soon.

Deposit insurance was created to stop bank runs. If depositors cannot distinguish a healthy bank from a failing one, the rational move for each individual is to withdraw immediately, and that behaviour can destroy solvent institutions. Insurance removes the incentive: below the limit, there is no reason to run.

The scheme works because it comes bundled with conditions. Insured banks are licensed, examined, subject to capital requirements, restricted in what they may do with deposits, and they pay premiums into the fund. The protection is the last piece of a supervisory system, not a standalone guarantee.

That is why extending it to crypto platforms is not a matter of political will. It would require the same supervisory apparatus — capital rules, examinations, restrictions on the use of customer assets, a funded scheme paid for by participants. Some jurisdictions are building parts of that under regimes like MiCA. None has arrived at deposit-style insurance for crypto assets, and it is reasonable to plan on the basis that none will soon.

In the meantime, the absence has a direct consequence for behaviour: because there is no backstop, the rational response to bad news about a platform is still to withdraw immediately, and everyone knows it. Runs remain a live risk in this market in a way they no longer are in insured banking, which is a large part of why the failures happen as fast as they do.

What this changes about how you should behave

If there is no backstop, the backstop has to be your own arrangement. Three things follow, and they are all boring:

Balance size is the only real control you have. No amount of research substitutes for not leaving money on a platform you are not actively using. This is the same conclusion the platform failure file reaches from a different direction, which is usually a sign it is right.
Two platforms beats one, if the amount matters. Not because either is safer, but because a single point of failure has caused every case worth studying.
Self-custody is an option with its own failure modes. It removes the platform risk entirely and replaces it with the risk that you lose the keys, which is not a smaller risk for everyone. That trade is examined in the file on "not your keys".

If you take one sentence from this page

There is no government scheme standing behind crypto held on an exchange, anywhere, and any marketing that implies otherwise is either describing a narrow bank-partner arrangement for dollar balances or is being misleading. Assume no backstop and size your position accordingly.

Last checked August 25, 2026. Spotted something wrong? Write to the desk — anything we get wrong ends up on the corrections page.

Is my crypto insured? Almost certainly not in the way you are picturing