Fueled by the ongoing cryptocurrency bull market, insurance funds held by major crypto exchanges have ballooned by over $1 billion, with Binance’s Secure Asset Fund for Users now boasting over $2 billion.
Binance’s insurance figure, based on holdings of Bitcoin, BNB, Tether, and TrueUSD as of April 3, reflects a significant increase from its $1 billion starting point in January 2022. Similarly, Bitget’s protection fund, launched in November 2022 with an initial $300 million, has risen to $612 million, primarily driven by Bitcoin’s price rise.
While most crypto exchanges offer some form of user protection, transparency around these funds varies. Binance and Bitget are currently among the few major players to publicly disclose the on-chain addresses of their holdings.
In 2019, Huobi (now HTX) announced a 20,000 BTC reserve, but questions remain about whether the exchange maintained that balance. BitMEX is also well-known for having a large insurance fund protecting users.
Meanwhile, OKX offers a $700 million “Risk Shield” program for user protection, but the composition of those funds (tokens, stablecoins, fiat, or a combination) remains unclear. Exchanges including Coinbase provide insurance policies with limitations based on user location and the type of currency held (fiat or crypto).
The decision to disclose on-chain addresses can be a complex one for exchanges, as doing so may expose them to various risks. Conversely, withholding this information renders the insurance fund’s status ambiguous.
This ambiguity has previously led to unfavorable outcomes, as collapsed cryptocurrency exchange FTX claimed to have a $100 million insurance fund, which its Chief Technology Officer Gary Wang admitted later was fabricated.
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- Source: https://www.cryptocompare.com/email-updates/daily/2024/apr/04/
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