One of the benefits of using cryptocurrency is the anonymity you receive through transactions. Unfortunately, this is also one of the main reasons that most exchanges offer no FDIC protection. This means that if the crypto exchange loses your dollar reserves, you have no protection. However, a few exchanges do participate by holding dollar reserves in an FDIC-insured bank. With those exchanges, if you lose your money on deposit the FDIC will reimburse those losses up to the program’s cap.
If you’re looking to hold large dollar amounts in an exchange you may want to first speak to a financial advisor who can help you plan accordingly.
What Is the FDIC?
The Federal Deposit Insurance Corporation, better known as the FDIC, is a program that insures cash deposits in bank accounts. It was created in the wake of the Great Depression when panicked customers rushed to take their money out of banks for fear of losing those deposits. Since banks use the money they hold on deposits to operate, a bank rush can put the entire institution out of business and leave customers with nothing.
To keep this from happening again the government now insures bank deposits. If your bank goes out of business or otherwise runs out of money, the government will reimburse any lost funds from your checking or savings accounts. This insurance covers up to $250,000 in losses per person per bank, and only applies to U.S. dollars held by licensed U.S. banks that pay into the FDIC’s insurance program.
Critically this means that the FDIC does not protect foreign currency or investment assets. If you have dollars in a checking or savings account and your bank loses the money, the FDIC will cover those losses. If you hold a stock portfolio and the market crashes, the government won’t make you whole.
Does the FDIC Insure Cryptocurrency?
The FDIC does not protect cryptocurrency because it considers crypto investment assets, not money. Even if the government changes its position on that issue, the FDIC only insures U.S. dollars. The result is that if you hold cryptocurrency like Bitcoins, Ethereum, Dogecoin or any other similar assets, the FDIC treats them like investment assets. It does not reimburse you for any losses, including:
Lost value of existing coins if the value of individual tokens in your portfolio declines;
Lost coins themselves if the number of tokens in your portfolio declines.
So, for example, say that you have a portfolio with a cryptocurrency exchange. The exchange is hacked and thieves steal your cryptocurrency tokens, or perhaps the exchange goes out of business and can no longer honor your cryptocurrency tokens. The FDIC will not reimburse you for these losses.
However, the FDIC might insure the U.S. dollars that you hold in a cryptocurrency exchange. Typically, this will be the case for exchanges that hold customer funds in FDIC insured banks. This means that the exchange doesn’t hold the money itself. Instead, any dollars in your account are held by a third-party bank and moved as necessary when you buy and sell cryptocurrencies.
As a result, it’s more technically accurate to say that some cryptocurrency exchanges hold their money in U.S., FDIC insured banks rather than that the FDIC covers some cryptocurrency exchanges.
This has become increasingly important in recent months. As the cryptocurrency market has lost billions, several projects and even entire exchanges have gone out of business. If you have money on deposit in an unprotected exchange you might lose not only your cryptocurrency but also any U.S. dollars you had in that account. If your exchange uses an FDIC-protected bank, on the other hand, you are protected up to the FDIC’s limit of $250,000 per person.
List of FDIC-Insured Cryptocurrency Exchanges
It would be impossible to give an exhaustive list of all cryptocurrency exchanges that do or do not offer FDIC protection. There are simply too many of them. However, the largest exchanges in the world do more than $1 billion in trading volume per day (exchange size as of time of writing).
Among those largest exchanges in the world, and we included a few that have less volume but are popular exchanges in the U.S., here are the ones that do and do not offer FDIC protection for your dollars on your deposits:
Binance – Insured for investors who trade with Binance.us
Upbit– Not insured
CITEX – Not insured
TOKENCAN – Not insured
BitForex – Not insured
P2PB2B – Not insured
LBank – Not insured
AAX – Not insured
FTX – Insured for investors who trade with FTX.us
Com– Not insured
Gemini – Insured
io– Not insured
HitBTC – Not insured
Coinsbit– Not insured
Bitrue– Not insured
Deepcoin – Not insured
IndoEx– Not insured
Coinbase – Insured
Huobi Global– Not insured
KuCoin – Not insured
OKX – Not insured
Changelly PRO – Not insured
BitMart – Not insured
MEXC – Not insured
CoinFLEX – Not insured
Hoo – Not insured
BKEX – Not insured
DigiFinex – Not insured
Pionex – Not insured
Cypto.com – Insured
So to sum it up, if you’re looking for FDIC insurance for your dollars on exchanges you’ll want to choose Binance, Gemini, Coinbase or Crypto.com from the list above.
The Bottom Line
The FDIC is a U.S. government program that protects bank customers against the loss of their deposits. The FDIC does not cover cryptocurrency losses, but if your exchange holds your money in a qualifying bank the FDIC might insure any U.S. dollars that you have on deposit. When buying a significant amount of crypto, it’s important to work with a financial advisor to make sure your assets are protected.
Tips for Buying Crypto
If you’re wanting to purchase crypto as part of your overall financial plan, you may want to consult with a financial advisor first to make sure your money is protected. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How can you buy cryptocurrency? While you should be very careful before treating crypto as an investment if you do have some high-risk/high-speculation dollars on hand, here’s where to start.
How can you choose a bank? Most consumers pick the institution closest to them, but that’s not always the right move. With SmartAsset’s matching tool you can find a financial professional in your area to advise you on issues just like this.
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