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Your crypto is not FDIC-insured, even when a bank or a company calling itself a crypto bank holds it. If a custodian fails, whether you can recover the assets depends on the legal entity and account involved, the custody agreement and records, and decisions made in any insolvency proceeding. Access may be delayed, and recovery is not guaranteed.
Does FDIC insurance protect crypto?
No. FDIC deposit insurance applies to eligible deposits at insured banks under applicable rules; it does not insure cryptocurrency or protect customers from the failure of a nonbank crypto company. The FDIC stated in its July 28, 2022 fact sheet: “Deposit insurance does not protect against the default, insolvency, or bankruptcy of any non-bank entity, including crypto custodians, exchanges, brokers, wallet providers, and neobanks.” FDIC fact sheet.
The FDIC has described coverage of up to at least $250,000 per depositor at an insured bank, subject to account ownership categories and other rules. That is deposit coverage, not a crypto-insurance limit. FDIC press release.
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Cash held through a crypto company is a separate question
A platform may say that it uses a bank to hold customer cash. That alone does not establish that your balance is an eligible deposit at that bank or that you, rather than the intermediary, are the legal depositor. Identify the bank, account type, and legal depositor in the account terms. Do not assume any bank relationship makes crypto held on the platform insured.
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What happens if a crypto custodian goes bankrupt?
There is no single outcome for every customer. A bankruptcy estate generally includes the debtor’s legal or equitable interests in property, but that rule alone does not decide who owns particular crypto held under a custody arrangement. U.S. Bankruptcy Code, section 541.
A 2026 SEC-filed disclosure warns that customer rights to digital assets held by a custodian remain relatively untested in bankruptcy or receivership and that outcomes may turn on the facts. A court might treat customer assets as estate property; affected customers could then be treated as general unsecured creditors and face markdowns or total loss. Even if assets are excluded from the estate, an automatic stay and related proceedings can delay or prevent their return. SEC-filed disclosure.
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This is a risk description, not a prediction that every custodian’s customers will lose their crypto. Some customers may ultimately establish rights to assets, but they should not assume that access or recovery will be immediate.
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Terms and operational records can inform the legal analysis, but none guarantees recovery. Review the arrangement for these specifics:
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- Legal entity and jurisdiction: Identify the company that actually holds or controls the assets, where it is organized, and which insolvency system may apply.
- Asset and account type: Determine whether the balance is an insured bank deposit, crypto held in custody, a security entitlement, or a claim against an intermediary.
- Ownership and segregation: Check what the agreement says about customer ownership, separate wallets or accounts, commingling, liens, lending, and rehypothecation.
- Operational control: Find out who holds the keys, whether you can withdraw directly, whether sub-custodians are used, and what the terms permit during a suspension.
- Proof and recovery: Note what records you may need to establish your holdings and how account access or keys are restored.
Federal banking agencies’ July 14, 2025 statement describes risk-management considerations for banks holding crypto assets for customers; it says it does not create new supervisory expectations. The OCC’s 2025 announcement says national banks and federal savings associations may conduct certain crypto custody and execution activities, including through outsourcing, subject to safe-and-sound operation, applicable law, and appropriate third-party risk management. Those bank requirements do not make crypto an insured deposit. Federal banking agencies’ statement; OCC announcement.
How to check your exposure
- Find the contracting entity. Read the account agreement and identify the exact legal entity responsible for custody. Check whether it is an insured bank or a nonbank provider.
- Separate cash from crypto. Identify which balances are bank deposits and which are digital assets held by a platform. Treat “bank-backed” or similar wording as a claim to verify, not proof of coverage.
- Read the custody terms. Look for ownership, segregation, lending, liens, setoff rights, and use of third-party custodians.
- Keep evidence of your holdings. Save account statements, transaction records, and copies of the relevant agreements so you can document balances and terms.
- Understand key recovery before choosing self-custody. A hardware wallet is a tool for managing private keys, not a device that stores coins or a guarantee against loss. Crypto remains on-chain, and access depends on the keys and usable backups. Loss or exposure of recovery information creates separate risks. Hardware wallet overview.
Would self-custody protect crypto from a platform failure?
Self-custody changes who controls the private keys: instead of relying on a custodian to provide access, you manage the keys and backups. That can remove dependence on a platform’s continued operation for control of those assets. It does not insure the crypto, protect against every kind of loss, or resolve a claim already caught up in an insolvency proceeding. The trade-off is responsibility for securing the keys and recovery information yourself.
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This article addresses the U.S. framework. The result for an individual account depends on its contract, the entities involved, asset records, and the facts of any insolvency; rules in other countries may differ.
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