One of the most common concerns among new crypto investors is: "What happens to my money if something goes wrong?" Unlike bank deposits protected by government schemes like the FDIC (US) or FSCS (UK), cryptocurrency does not have universal deposit protection. However, several forms of insurance and protection do exist — and understanding them is critical for managing risk.
The Key Difference from Bank Insurance
⚠️ Critical Understanding
Bank deposits in the UK (FSCS), US (FDIC), and EU are insured up to specified limits by government schemes. Crypto held on exchanges has no equivalent government protection. If your exchange is hacked or goes bankrupt, your funds may be at risk. Self-custody (holding your own keys) is the primary way to mitigate this risk.
Types of Crypto Protection Available
Exchange Commercial Crime Insurance
Major centralised exchanges (Coinbase, Gemini, Kraken) hold commercial crime insurance policies through Lloyd's of London and similar underwriters. This covers assets in hot wallets against hacking or employee theft.
Limitation: Typically covers only a small percentage of total exchange assets. Does not cover user funds against insolvency.
Examples: Coinbase: $255M commercial crime policy. Gemini: Crypto held in hot wallets insured by third-party providers.
SIPC-Style Protection (US Specific)
Some US-regulated crypto brokers are beginning to qualify for SIPC protection on cash balances (not crypto itself). The SEC is working on frameworks, but as of 2026, crypto assets themselves are NOT SIPC-insured.
Limitation: Only applies to cash held with SIPC member firms, not to crypto holdings.
Examples: Cash balances on certain regulated US platforms may qualify for limited protection.
DeFi Insurance Protocols
Decentralised insurance platforms like Nexus Mutual, InsurAce, and Sherlock allow crypto holders to purchase smart contract cover — protection against protocol hacks, oracle failures, and exchange insolvencies.
Limitation: Premiums can be expensive (2-5% annually). Coverage amounts are limited by protocol liquidity. Claims processes are community-voted and may take time.
Examples: Nexus Mutual: Covers smart contract bugs on specific protocols. InsurAce: Multi-chain coverage for DeFi positions.
Cold Storage Custodian Insurance
Institutional-grade custodians like BitGo and Coinbase Custody hold insurance on assets held in cold storage — separate from exchange operational funds. These are primarily designed for institutional clients.
Limitation: BitGo holds up to $250M in coverage on cold storage assets. Conditions apply.
Examples: BitGo: $250M cold storage insurance policy. Anchorage Digital: SOC 2 compliant with institutional coverage.
The Best Protection: Self-Custody
The most reliable protection against exchange insolvency is holding your crypto in a non-custodial wallet that you control. When you hold your own private keys, no exchange bankruptcy, hack, or fraud affects your holdings. The FTX collapse (2022) saw an estimated $8 billion in user funds lost — entirely preventable by self-custody.
How Wealtii Protects Your Assets
Wealtii uses a 1:1 asset-backed model — for every dollar you invest, a corresponding asset is held in custody. We publish fund compositions publicly and work toward Proof of Reserves verification. Learn about our security →
Frequently Asked Questions
Does crypto have insurance?
Some exchanges hold commercial crime insurance on hot wallets, and DeFi protocols offer smart contract cover. However, there is no government-backed deposit insurance equivalent to FDIC or FSCS for cryptocurrency assets.
Is my crypto protected if an exchange goes bankrupt?
Not necessarily. Exchange customers are typically unsecured creditors in bankruptcy. The FTX collapse demonstrated this risk clearly. Self-custody in a non-custodial wallet is the most reliable protection against exchange insolvency.
Disclaimer: This content is for educational purposes only and does not constitute financial, tax, or legal advice. Digital assets are volatile and carry risk of loss. Wealtii is early-stage and NOT YET REGULATED in all jurisdictions.