The ongoing bull market in the crypto industry has led to a significant increase in the value of the top crypto exchange insurance funds. Binance’s Secure Asset Fund for Users (SAFU), which includes Bitcoin, BNB, Tether, and TrueUSD balances, has grown from $1 billion in January 2022 to over $2.03 billion as of April 3. Bitget’s initial $300 million protection fund has also surged to $612 million due to the appreciation of its Bitcoin holdings. This surge in value is a result of the significant gains made by Bitcoin and BNB in the past year.
While most crypto exchanges have insurance protection for their users, only Binance and Bitget have disclosed their on-chain addresses. In 2019, Huobi announced a 20,000 BTC reserve for extreme security accidents, but it is unclear if the exchange still holds this balance. The HTX group of companies, which includes Huobi, experienced several exploits last year, resulting in the loss of millions of dollars.
OKX, another crypto exchange, has a $700 million “Risk Shield” program for user protection, but it is unclear what assets this amount comprises. Some exchanges, like Coinbase, offer insurance based on the location of their customers and the type of funds they hold.
Exchanges may choose not to disclose their on-chain addresses for various reasons, including concerns about cybersecurity attacks. Former FTX chief technology officer Gary Wang revealed that FTX’s $100 million insurance fund in 2021 was fabricated and did not contain any FTT tokens. This fund was intended to protect users from large market movements.
However, on-chain addresses only provide part of the picture and do not include information about an exchange’s off-chain liabilities. Some jurisdictions, such as Hong Kong, have mandated that crypto exchanges provide insurance that covers up to 50% of users’ fiat and crypto assets.
Overall, the surge in value of crypto exchange insurance funds reflects the positive performance of the crypto market in recent years and highlights the importance of user protection in the industry.