The ongoing crypto bull market has resulted in a significant increase in the value of top crypto exchange insurance funds, surpassing $1 billion.
Binance’s Secure Asset Fund for Users (SAFU), which includes Bitcoin (BTC), BNB, Tether (USDT), and TrueUSD (TUSD), has grown from an initial balance of $1 billion in January 2022 to over $2.03 billion as of April 3. Similarly, Bitget’s protection fund, launched in November 2022 with $300 million, has surged to $612 million due to the appreciation of its Bitcoin holdings. This growth can be attributed to the impressive performance of Bitcoin and BNB, which have gained 136% and 79.36% respectively in the past year as part of the crypto bull run.
While most exchanges offer some form of insurance protection for users, only Binance and Bitget have disclosed their on-chain addresses. In 2019, Huobi, now HTX, announced a reserve of 20,000 BTC ($1.32 billion) in an independent address to handle extreme security incidents. However, it is unclear if the exchange still holds this balance. Additionally, the HTX group of companies experienced several exploits last year, resulting in the loss of millions of dollars.
OKX, another crypto exchange, has implemented a $700 million “Risk Shield” program to protect its users. However, the composition of this amount, whether it includes tokens, stablecoins, fiat funds, or a combination, remains unclear. Coinbase, on the other hand, offers insurance based on the user’s location and whether their funds are in fiat or crypto.
Some exchanges choose not to disclose the on-chain addresses of their holdings due to concerns about cybersecurity attacks or, as in the case of FTX, deception. FTX’s former chief technology officer revealed that the exchange’s $100 million insurance fund in 2021 was fabricated and did not contain any of the FTX Token (FTT). This fund was intended to safeguard users against significant market movements and was prominently advertised on the exchange’s website and social media.
It is important to note that on-chain addresses provide only partial information and do not account for an exchange’s off-chain liabilities. To address this, jurisdictions like Hong Kong have mandated that crypto exchanges provide insurance covering up to 50% of users’ fiat and crypto assets.
In related news, HashKey has signed a memorandum of understanding (MOU) for crypto exchange insurance.