TL;DR
- Cryptocurrencies stored on exchanges are not insured, according to Dogecoin influencer.
- The Terms of Service of several American exchange platforms reveal this lack of protection.
- The importance of considering self-custody options to protect long-term investments is highlighted.
In the fast-paced world of cryptocurrencies, security and asset protection are constant concerns for investors.
Recently, Dogecoin influencer, Mishaboar, shared an alarming warning via his social media.
Dear #Dogecoin, many new to crypto do not realize that cryptocurrencies held on exchanges and trading platforms are entirely uninsured.
If the exchange goes bankrupt, you risk losing it all.
This applies to all exchanges.
From Robin Hood Crypto's Terms of Services: pic.twitter.com/Xccyon87ew
— Mishaboar (@mishaboar) March 11, 2024
He noted that many people new to the world of cryptocurrencies are not aware that funds stored on exchanges and trading platforms lack insurance.
This disclosure is based on a detailed analysis of the Terms of Service of several US-based exchanges, including well-known names such as Robinhood, Coinbase, Kraken and Binance.US.
In these terms, it is made explicit that cryptocurrency funds are not protected by financial institutions such as the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC), which provide coverage for traditional bank accounts or services. brokerage.
The lack of insurance in cryptocurrencies applies in case the exchange declares bankruptcy or suffers an attack
Investors risk losing their digital assets beyond recovery.
A recent example of this situation was the collapse of the FTX exchange in 2022, which left thousands of investors without access to their crypto.
Given this panorama, the importance of considering self-custody alternatives to protect long-term investments is emphasized.
While exchanges can be useful for short-term operations or active trading, they do not offer the same security as self-custody solutions.
Self-custody wallets, both software like Trust Wallet or Metamask, and hardware like Ledger and Trezor, provide an additional level of protection by allowing users to store their cryptocurrencies offline, away from potential online threats.
Mishaboar‘s warning serves as a crucial reminder to all cryptocurrency investors: the security of funds is a personal responsibility and it is essential to take steps to protect investments in an environment as volatile as cryptocurrency.
