Exchange Insurance: What It Is and Why It Matters for Crypto Traders

When you trade crypto on an exchange, you're trusting someone else to hold your money. That’s risky. Exchange insurance, a safety net offered by some crypto platforms to reimburse users if funds are stolen in a hack. Also known as custodial exchange protection, it’s not automatic—it’s a feature some platforms pay for, and others don’t bother with. If an exchange gets hacked and doesn’t have insurance, your coins are gone. No refund. No appeal. Just silence.

Not all exchanges are built the same. Some, like APROBIT, a South Korean exchange with strong compliance and security practices, make security a priority. Others, like KokomoSwap, a fake platform with no real operations or user activity, are outright scams. Even big names like Bybit, a global exchange flagged for lack of licensing in countries like Nigeria, have drawn criticism for leaving users exposed. Real exchange insurance means the platform has a fund—often backed by third-party insurers like BitGo or Coincover—to cover losses. It’s not marketing fluff. It’s a contract.

But here’s the catch: most exchanges don’t insure all your assets. Some only cover a percentage. Others only insure hot wallet funds, leaving cold storage out. And many don’t tell you what’s covered at all. If you’re holding large amounts, you need to dig deeper. Look for public audit reports, insurance policy details, and whether the exchange has ever paid out after a breach. The ones that do are rare. The ones that brag about it without proof? Even rarer.

And don’t confuse insurance with cold storage. Storing crypto offline is smart—but it doesn’t help if the exchange you’re using gets hacked and you didn’t move your coins out. Insurance is what happens after the fact. Your own security—like 2FA, a second layer of login protection that stops most account takeovers—is what stops the breach from happening in the first place. Both matter. One prevents, the other recovers.

What you’ll find here are real cases: exchanges that failed, exchanges that paid up, and the scams that pretend to offer protection. You’ll see how Angola banned mining because power theft hurt hospitals, how North Korea steals crypto to fund weapons, and why projects like Bird Finance and SMAK vanished overnight. This isn’t theory. It’s what happened. And it’s what could happen to you if you don’t know the difference between a safe exchange and a ticking time bomb.