Is Your Crypto Safe on an Exchange?

Key takeaways

An AML registration is not investor protection, and the two are routinely conflated in marketing.
Deposit insurance schemes almost never cover crypto balances.
The largest exchange hack on record happened in 2025, to a venue with a regulator.
Self-custody removes venue risk and replaces it with your own key management.

What happens if the exchange fails

When a bank fails in a developed market, a compensation scheme usually returns your deposit up to a limit. When a crypto exchange fails, that machinery generally does not apply. Your coins were held by the company, your claim is against the company, and you stand in line with everyone else the company owes.

Recoveries in past insolvencies have taken years and returned a fraction. This is the single most important thing to understand before deciding how much to leave on any venue.

What 'regulated' actually means here

Almost every exchange describes itself as regulated. In most cases what they hold is a registration under anti-money-laundering rules: the firm must verify customer identity and report suspicious activity. That is all it means. The regulator has not assessed whether the venue is solvent, whether it holds customer assets properly, or whether the product is suitable for you.

A small number of firms hold something genuinely stronger. Kraken's UK entity Crypto Facilities Ltd holds an FCA investment licence as a multilateral trading facility — a different category of permission from the AML registration its exchange arm holds. This site names the registered entity beside every licence for exactly this reason: the protection follows the entity, not the brand.

What each permission covers
Permission	Regulator checks	Your balance protected?
Full investment licence	Conduct, capital, client asset rules	Often, via a compensation scheme
VASP / AML registration	Identity checks and reporting only	No
Money-transmitter registration	Payment handling	No
E-money licence	Safeguarding of fiat funds only	Fiat sometimes; crypto no

Big does not mean safe

In February 2025 roughly $1.5bn in Ethereum was taken from Bybit in a cold-wallet compromise — the largest exchange theft ever recorded. Bybit covered customer balances and kept withdrawals open, which is the outcome you want, but the event happened at a large, established, registered venue.

Size and a regulator's name in the footer are not a substitute for limiting how much you leave on any single platform.

How to check a venue in five minutes

This is worth doing before you deposit anything, and it is quicker than most people expect.

Find the registered entity name in the footer, then search it on the regulator's own register — not on the venue's own claims page.
Read what the register says the permission covers. If the words 'investment' or 'client money' do not appear, assume your balance is unprotected.
Search the regulator's warning list for the brand name. Clone firms trading on well-known names are common and are listed publicly.
Check whether the venue publishes proof of reserves, and whether it is audited by anyone independent.
Test a small withdrawal early, before you have a meaningful balance to move.

Frequently asked questions

Is Binance safe?

Binance is the largest exchange by volume and holds registrations in several jurisdictions. It also pleaded guilty to US anti-money-laundering charges in November 2023 and paid a $4.3bn settlement, with its founder stepping down as CEO. Both facts are relevant; neither is the whole picture.

Is Coinbase safe?

Coinbase is a US-listed public company with the disclosure obligations that brings. Its UK entity, CB Payments Ltd, holds an e-money permission rather than an investment licence — a payments permission that does not protect a crypto balance.

Should I keep my crypto on an exchange?

Keep what you are actively trading and move the rest to a wallet you control. The trade-off is honest: the venue can fail or freeze you, but you can also lose a recovery phrase. Pick the risk you are better equipped to manage.

Does proof of reserves mean my funds are safe?

It helps but proves less than it sounds. Proof of reserves shows assets at a moment in time; without a matching proof of liabilities it cannot show whether those assets exceed what the venue owes.