For generations, most Americans have put their money in banks knowing that if somehow things went sideways, their funds would be covered by the full force of the government’s treasury. Through the Federal Deposit Insurance Corporation (FDIC), which was born from the ashes of the Great Depression, losses of up to $250,000 are covered.
Cryptocurrency investors likely want an equivalent to the FDIC after the world’s largest cryptocurrency exchange, Binance, was hacked on October 29th with an estimated impact of $6.3 billion, raising questions about the recovery of stolen funds and the broader impact on the crypto market. According to Binance’s security update, about $3 billion in stolen assets have been frozen so far.
In a security update on Saturday, the exchange announced that it has replenished 90% of the stolen assets and is working to cover the remaining 10%. Blockchain researchers at TRM Institute and Chainalysis have linked the attack to North Korea, but neither the US government nor Binance have publicly acknowledged the origin of the hack.
Understanding how cryptocurrencies are protected online and what mechanisms exist to serve a role similar to insurance is becoming increasingly important as more Americans invest in cryptocurrencies.
According to the Pew Research Center, approximately one in five U.S. adults say they have invested in, traded, or used cryptocurrencies, and this number is even higher among high-income households (27%). According to the Securities and Exchange Commission’s 2024 and 2025 surveys, that number is closer to 15%, and it is estimated that about 9% of retail investors owned cryptocurrencies at the time of the survey. The findings show that cryptocurrency ownership is more common among younger individuals, men, and those with a higher risk tolerance as well as higher financial literacy.
While Binance has made good on its promise to cover any losses from the hack with its SAFU (Safe Assets Fund for Users) or funds from other companies, there is no evidence that the private keys of the wallets were compromised in this incident, but cybersecurity expert and University of San Diego professor Nicholas Behar said crypto investors need to understand that when using a crypto platform, a pledge is “just a pledge until it’s agreed upon.” actual payment. ”
If something were to happen to cryptocurrencies, most consumers would be left navigating a patchwork of options that vary from exchange to exchange and are often very vague. Many exchanges say they will refund customers if something goes wrong.
“There really is no legal protection for crypto assets that is comparable to FDIC insurance,” said Josephine Wolfe, a professor of cybersecurity policy at Tufts University’s Fletcher School.
He said customers could sue hacked exchanges for negligence, for example, or recover some of their funds if the exchange declares bankruptcy, as happened with FTX. But “there is no guarantee of compensation,” she says.
Michael Tangma, co-founder and CEO of Bitcoin financial services and custodian company Onramp Bitcoin, said that if an exchange is hacked, customers will typically be reimbursed, but “only if the exchange decides to pay and has the funds to do so.”
“Nowhere in the law are we required to do so,” Tanguma said.
“Some of the stolen funds may be frozen. Tether and Circle, the two largest dollar-backed token developers, froze billions of dollars in stolen funds this week, and law enforcement may recover the assets years later,” Tanguma said. But he added that once Bitcoin leaves control, it almost always disappears because there is no company behind it that can freeze it.
Customers who have lost their funds individually are in a completely different situation than those caught up in a currency attack.
“If your account is compromised through a stolen password, a phishing link, or a hijacked phone number, the outlook is even worse,” Tanguma said, noting that exchanges typically treat these losses as a customer issue, and that once a crypto transaction is confirmed, it is final, so there is no need to call the bank or the cost of filing a dispute.
store your own digital currency
Tangma said that while keeping coins offline can protect against the type of attacks that hit Binance, this digital security approach also comes with other risks.
“The stolen funds did not come from offline reserves, but from wallets that the exchange continues to connect to the internet for daily withdrawal processing,” Tanguma said. But he added that the details of this hack point to a larger problem.
“Binance has stated that no keys have been compromised. The attackers manipulated the system for approving withdrawals, using the same technique used in last year’s $1.5 billion theft from Bybit, which was moved from cold storage,” Tanguma said, noting that every storage setup has weaknesses, and most have one weakness.
“On an exchange, it’s the company that matters: the employees, the approval system, the finances, the willingness to repay,” Tanguma said. When you have your own coin, the point is yours. This could be a lost device, a backup found by the wrong person, a tampered device purchased from an unofficial seller, a transaction approved under pressure, or a family member unable to access funds after death.
“Moving deposits off exchanges is exchanging one type of risk for another. It does not remove risk,” Tanguma said.
Possibility of getting your money back after cryptocurrency hacking
Sarah Downey, executive vice president and global blockchain and digital asset advisory leader at insurance brokerage Lockton, said other factors also come into play when determining whether cryptocurrencies can be recovered, including how quickly the theft is discovered, where the funds were moved, whether the exchange or wallet provider has insurance to cover the event, and whether it holds sufficient reserves to repay customers.
“Some companies have insurance and other backstops in place, such as the FDIC, but whether these are paid out depends largely on the facts of each case. Even without insurance, many exchanges seek to repay customers from their own reserves to protect both their customers and their own reputations,” Downey said.
The cryptocurrency exchange’s refunds come on the heels of other security breaches, including in May 2025, after rogue overseas support agents accepted bribes to help defraud Coinbase customers. BitGet, another major exchange, had to tap internal funds to refund customers after a $388 million hack in September. Bitget CEO Gracy Chen said the company’s User Protection Fund, which holds more than $464 million, covered the losses. “The Protection Fund was created for moments like this to absorb the economic impact of the incident,” Chen said in a post to X at the time.
By comparison, Binance’s emergency reserve, the Safe Assets Fund for Users (SAFU), is estimated to be around $1 billion to $1.2 billion, which equates to about a third of its losses, excluding frozen funds. The company said it has secured more than $6.34 billion in internal funding and already has more than $5 billion in corresponding token assets.
Downey said the steps to take if a cryptocurrency is hacked will depend on whether investors self-custody or use a third party, such as a regulated exchange.
“If you use a third party, you need to make sure that most of your funds are stored offline or protected by multiparty calculations. Investors’ own funds should also be kept separate from the exchange’s own funds,” Downey said, adding that customers also need to understand how the custodian approves trades and controls custody.
Ryan Reck, founder and president of Reck Advisory, an independent cybersecurity advisory firm, points to the lack of oversight over cryptocurrencies.
“Cryptocurrency has no undo button. Once a transfer is confirmed, there are no chargebacks and no one can reverse it,” Reck said. In some cases, stolen funds may be frozen by the receiving exchange or by the stablecoin issuer of a particular blockchain address, but tracing the funds is one thing and getting it back is another.
Common reasons investors cite for investing in cryptocurrencies include diversification from traditional assets, using cryptocurrencies as a digital version of gold, investing in the theme of financial decentralization, and betting that digital currencies will be a tailwind as more institutions adopt them. And of course there is speculation. Currently, iShares Bitcoin Trust (ibit), with over $62 billion in assets, or Fidelity Wise Origin Bitcoin Fund (FBTC), with assets exceeding $15 billion. Also, Bitwise 10 Crypto Index Fund (bit) and Grayscale CoinDesk Crypto 5 ETF (GLDC).
For investors who want to own cryptocurrencies directly, Reck says there are four questions to ask before trusting a platform:
What is covered? What is excluded? What is the coverage for all customers combined? Do I have a mandatory right to repayment?
“‘I have insurance’ is a conversation starter, not proof that your money is protected,” Reck says.
—CNBC’s Jenny Lee contributed reporting.
