The record-breaking hack at Binance, the world’s largest cryptocurrency exchange, is a reminder of the risks investors take when trusting companies with their digital tokens.
Binance announced on Friday that the security breach affected approximately $6.3 billion in customer assets, making it the largest cryptocurrency hack in history. Approximately $3 billion of the affected assets are frozen on the blockchain network, and the exchange says it has begun recovering some of it.
Binance said its initial investigation suggests that hackers were able to access the company’s withdrawal system and make fraudulent transfers from the exchange’s cryptocurrency wallets. The company said it has found no evidence that the private keys controlling these wallets were compromised and is still investigating the full scope of the breach.
The company says it will compensate customers for their losses. Binance maintains an approximately $1 billion emergency fund known as SAFU, established to protect customers in the event of a security breach. The company initially said it would cover the losses with SAFU and its own funds, but later announced it had set aside more than $6.3 billion of its own funds.
For crypto investors, the Binance breach highlights one of the risks of keeping assets on exchanges. Exchanges make it easy to buy, sell, and store cryptocurrencies, but what happens after a hack varies widely, including whether customers get their money back.
What happens to cryptocurrencies if the exchange is hacked
Cryptocurrency exchange hacks are not uncommon. Hackers stole around $1.5 billion from Dubai-based exchange Bybit in 2025, and Seychelles-registered Bitget lost more than $387 million in a hack in September 2026.
But hacking doesn’t mean customers lose money forever. Stolen assets may be recovered or frozen to prevent them from being moved or converted into cash by hackers. Exchanges may also have insurance, dedicated emergency funds, or other corporate resources available to cover losses.
In Binance’s case, about half of the affected assets have already been frozen, and some of the stolen cryptocurrencies cannot be moved. The approximately $1 billion SAFU emergency reserve fund provides additional security should the need arise.
Customers cannot always quickly recover stolen digital assets. New Zealand exchange Cryptopia was forced into liquidation within months after around NZ$30 million in cryptocurrencies were stolen in a 2019 hack. The liquidation process lasted for years, with the first distributions finally starting in 2024.
“When you keep a cryptocurrency on an exchange, you are dependent on the management and balance sheet of that company,” said Martin Mulyadi, YHB Accounting Endowment Chair and professor of accounting at Shenandoah University. “Our commitment to making our customers whole is only as strong as the resources behind it.”
Things to keep in mind when choosing a virtual currency exchange
When considering where to trade and hold your cryptocurrencies, start by researching the exchanges themselves. The Securities and Exchange Commission recommends searching for customer complaints to see how the exchange is regulated.
US customers can also check whether an exchange is registered with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) using an online database. Registration helps confirm that you are dealing with an identifiable company operating within the U.S. regulatory system, but FinCEN cautions that registration does not endorse the company.
Cryptocurrency experts also recommend reading the exchange’s user agreement and terms of service. Some exchanges may have separate custody agreements and risk disclosures, which are also worth checking, Mulyadi says.
Look for language that explains who owns your cryptocurrency and what the exchange can do with it. Phrases like “you retain ownership” or the assets “are held for your benefit” are good signs, Mulyadi says. Check whether customer assets are kept separate from exchange assets. This may provide additional protection if the company goes bankrupt. And find out if the exchange allows you to lend or otherwise use your cryptocurrency. This may expose your assets to further risks.
According to Mulyadi, check the exchange’s liability limitations section in your user agreement to see what insurance the exchange offers and what it actually covers.
“If refunds after a hack are at the discretion of the exchange, that is a goodwill, not a promise,” Mulyadi said.
Even if the terms contain strong language, there is no guarantee that your assets will be safe. Mulyadi said FTX, a popular cryptocurrency exchange that went bankrupt in 2022, misappropriated billions of dollars in customer funds even though its terms and conditions said the assets belonged to the customers.
Is it safer to store your cryptocurrencies on an exchange or yourself?
If you don’t want to hold your cryptocurrency through an exchange, there is another option known as “self-custody.”
Self-custody involves using your own crypto wallet and controlling the private keys used to authorize transactions on the blockchain. Wallets usually come with a recovery phrase. This is essentially a master password that you can use to restore access to your wallet if you lose it.
This allows you to manage your cryptocurrencies without relying on an exchange, but it also leaves you responsible for keeping that information safe.
And for anyone who has ever lost or forgotten a password, the risk of self-control is real. With self-custody, “If you lose your recovery phrase, there’s no help desk,” Mulyadi says.
Mulyadi says the middle ground for many investors is to hold only those that are actively traded on exchanges and hold long-term assets themselves, as long as they know how to safely store and retrieve them.
“The coins on the exchange are a promise to a company, but the coins in your wallet are a responsibility you cannot leave to someone else,” Mulyadi said.
