For many years, most Americans have been aware that when depositing money in banks, their funds are protected by the financial power of the government in case of serious problems. The Federal Deposit Insurance Corporation (FDIC) provides coverage for losses up to $250,000. This institution was established after the Great Depression.

After the world's largest cryptocurrency exchange, Binance, was attacked by hackers on October 29th, crypto investors may hope for a mechanism similar to FDIC. This incident is estimated to have affected up to $6.3 billion and has raised questions about the recovery of the stolen funds as well as its broader impact on the crypto market. According to a security update from Binance, approximately $3 billion in stolen assets have been frozen so far.

The exchange promised to bear all losses. Blockchain investigation agencies TRM Labs and Chainalysis linked this attack to North Korea, but neither the U.S. government nor Binance has publicly confirmed the source of the hacker attack yet.

Binance's Co-CEO Richard Teng stated in a post on X: "We commit to covering all losses caused by hacker attacks with company funds. Your assets are safe."

As more and more Americans invest in cryptocurrencies, it is becoming increasingly important to understand how crypto assets are protected online and what mechanisms can serve a similar role to insurance.

Pew Research Center states that approximately one-fifth of American adults indicate they have invested in, traded, or used cryptocurrencies, and this proportion is even higher among high-income households, at 27%. The U.S. Securities and Exchange Commission (SEC), based on studies from 2024 and 2025, believes this figure is closer to 15%, and estimates that about 9% of the investing public held cryptocurrencies at the time of its survey. The survey also shows that holding cryptocurrencies is more common among younger people, men, and those with a higher willingness to take risks, who tend to also have a higher level of financial literacy.

Although Binance promises to bear all losses, this does not equate to being legally bound.

San Diego University cybersecurity expert and professor Nikolas Behar stated: "Binance claims that it will cover all losses through the SAFU fund and company funds, and asserts that there is no evidence indicating a leak of wallet private keys. Until actual compensation is made, these are merely promises."

Similar commitments have also appeared after other crypto security incidents. In May 2025, after overseas support staff were bribed and stole customer data, Coinbase stated that they would compensate customers who suffered losses due to the related scam. The company said in a blog post: "We will compensate those customers who were tricked into transferring funds to the attackers."

If there are issues with your crypto assets, most consumers often face a set of response options that vary from exchange to exchange and are usually rather vague. Many exchanges claim that in the event of problems, customers will be compensated.

Professor of Cybersecurity Policy at Fletcher College at Tufts University, Josephine Wolff, stated, "In fact, there is no legal protection for crypto assets that is equivalent to the insurance provided by FDIC."

She said that customers could try to sue exchanges that have been hacked, for example, by claiming that there was negligence on their part; if the exchange declares bankruptcy, it is also possible to recover some of the funds, just like in the case of FTX. However, she noted, "Compensation is not guaranteed."

Onramp Bitcoin, a Bitcoin financial services and custody company, co-founder and CEO Michael Tanguma stated that when exchanges are hacked, customers usually receive compensation, "but that's only because the exchange decides to compensate, and it has the ability to do so."

Tanguma said, 'The law does not require it to do so.'

Tanguma indicates that "a portion of the stolen funds can be frozen. The companies behind the two major dollar-pegged tokens, Tether and Circle, have frozen billions of dollars from this week's theft, and law enforcement authorities may also recover the assets after several years." However, he added that there is no company behind Bitcoin that can freeze it, so once it gets out of your control, it almost always disappears forever.

Unlike customers who are involved in exchange attack incidents, when an individual loses funds on their own, the situation is completely different.

Tanguma said, "If it's your own account that is compromised, for example, if your password is stolen, you click on a phishing link, or your phone number is hijacked, the consequences are much worse." He pointed out that exchanges usually regard such losses as the customer's own problem, and since encrypted transactions are irreversible once confirmed, there is no bank to call for help, nor is there any money that can be claimed back.

Store digital currencies by yourself.

Tanguma indicates that saving tokens offline can protect against the type of attack that Binance encountered this time, however, this digital security method also comes with other risks.

He said, "The stolen funds came from the wallets that the exchange keeps online for handling daily withdrawals, not from its offline reserves." However, he added that the details of this hacking incident point to a larger problem.

Tanguma said, 'Binance claims there has been no key leakage. The attackers manipulated the system that approves withdrawals, using the same method as in last year's $1.5 billion theft case involving Bybit, which targeted funds transferred from cold storage.' He pointed out that every custody architecture has its weaknesses, and in most cases, there is only one such weakness.

Tanguma said, "In the exchange, this weak point lies in the company itself: its employees, its approval system, its financial condition, and whether it is willing to compensate you." He said that when you hold tokens yourself, this weak point becomes you: losing your devices, backups being found by people who shouldn't have access to them, purchasing tampered devices from unofficial sellers, approving transactions under pressure, or family members being unable to access the funds after the holder passes away.

Tanguma said, "Transferring savings from an exchange is just replacing one type of risk with another; it does not eliminate risk at all."

What is the chances of getting your funds back after encrypted assets are stolen?

Lockton, the Executive Vice President of the insurance brokerage firm and Head of Global Blockchain and Digital Assets Consulting, Sarah Downey, stated that factors determining whether you can get your encrypted assets back also include: how quickly the theft is discovered, where the funds are transferred to, whether the exchange or wallet service provider has insurance covering such incidents, and whether they have sufficient reserves to compensate customers.

Downey said, "Some companies have established insurance or other fallback mechanisms similar to FDIC, but whether these mechanisms will pay out depends to a large extent on the specific facts of each case. Even in the absence of insurance, many exchanges will try to compensate customers from their own reserves to protect both the customers and their own reputation."

Another large exchange, Bitget, had to use its internal funds to compensate customers after a $388 million hacker attack in September. Gracy Chen, the CEO of Bitget, stated that their user protection fund exceeds $464 million, which covered this loss. In a post on X, it was said: "The protection fund is precisely established for such moments, and it absorbed the financial impact of this incident."

In contrast, Binance's emergency reserve, the "User Safety Asset Fund" ( Secure Asset Fund for Users , abbreviated as SAFU ), is estimated to be around $1 billion to $1.2 billion. Excluding the funds that have already been frozen, this amount is roughly equivalent to one-third of the losses. In an update on October 30th, Binance stated that the company has allocated over $6.34 billion in company funds and currently holds more than $5 billion in corresponding token assets.

Downey indicates that the steps to take if your crypto assets are stolen depend on whether the investor manages them themselves or uses third-party services such as regulated exchanges.

She said, "If they use third parties, it should be confirmed whether most of the funds are stored offline or if they are protected by multi-party computations. Investors' own funds should also be kept separate from the exchange's own funds." She also added that customers should understand how the custodian authorizes transactions and how storage is managed.

The founder and head of the independent cybersecurity consulting firm Reck Advisory, Ryan Reck, pointed out that the crypto industry lacks regulatory oversight.

Reck said, "There is no undo button in the crypto world. Once a transfer is confirmed, there is no mechanism for refusal, and no one can reverse it." In some cases, exchanges that receive stolen funds, or stablecoin issuers, can freeze these funds on specific blockchain addresses, but tracking the funds and actually getting them back are two different things.

When investors provide reasons for investing in cryptocurrencies, common arguments include: diversifying traditional asset portfolios, viewing cryptocurrencies as the digital equivalent of gold, betting on the theme of financial decentralization, and anticipating that as more institutions adopt digital currencies, this will create a favorable trend. Of course, there are also speculative factors at play. Nowadays, there are ways to invest in cryptocurrencies without having to hold the underlying assets in a wallet, such as through exchange-traded funds (ETFs). For example, iShares Bitcoin Trust ( IBIT ), whose asset size has exceeded $62 billion.

For investors who wish to directly hold cryptocurrencies, Reck suggests that before trusting any platform, they should ask four questions first:

• What is the scope of coverage?
• Which situations are not covered by the guarantee?
• What is the total coverage amount for all customers?
• Do I have the right to claim compensation that is enforceable?

Reck said, "'Insured' is just the starting point of the discussion; it does not prove that your money is actually protected."

—— CNBC's Jenny Lee also contributed to this article's reporting.