Amid the ongoing cryptocurrency bull market, the leading cryptocurrency exchange insurance fund has seen a stunning rise in value, exceeding $1 billion.
As of April 3, Binance’s Secure Asset Fund for Users (SAFU), which consists of Bitcoin, BNB, Tether, and TrueUSD (TUSD) balances, has surged from an initial balance of $1 billion in January 2022 to $2.03 billion. I passed it. Likewise, Bitget’s protected fund, initially set at $300 million at launch in November 2022, has now grown to $612 million due to the rising value of its Bitcoin holdings. Over the past year, Bitcoin has surged 136%, while BNB has increased 79.36%, contributing to the growth of insurance funds amid cryptocurrency strength.
Most exchanges offer some sort of insurance protection to their users, but only Binance and Bitget have made their on-chain addresses public. Huobi (now HTX) previously announced a reserve of 20,000 BTC ($1.32 billion) to independent addresses in 2019 to address extreme security incidents. However, it is unclear whether the exchange still maintains this balance, especially after suffering significant losses due to multiple abuses last year.
Cryptocurrency exchange OKX has a $700 million “risk protection” program to protect its users, but it is unclear whether this amount consists of tokens, stablecoins or fiat funds. Conversely, exchanges like Coinbase offer insurance based on the customer’s geographic location and the nature of the funds (whether fiat or cryptocurrency).
Some exchanges may choose not to disclose on-chain addresses for a variety of reasons, including concerns about cybersecurity attacks or potential fraud, as seen in the case of defunct exchange FTX. Former FTX Chief Technology Officer Gary Wang revealed that the $100 million insurance fund claimed by FTX in 2021 was manipulated and did not contain any FTX tokens (FTT). This highlights the importance of transparency and accountability in the cryptocurrency exchange ecosystem.
On-chain addresses provide insight into the assets held by an exchange, but do not account for off-chain liabilities. In response to these concerns, jurisdictions such as Hong Kong are mandating cryptocurrency exchanges to provide insurance covering up to 50% of users’ fiat and cryptocurrency assets, thereby better protecting investors.
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