Please note: the companies that hold your crypto are not insured like the banks are.


But this risk is by no means limited to price volatility.

If the company holding your crypto assets declares bankruptcy or is otherwise unable to meet its financial obligations, you might be out of luck. While your traditional savings and investment accounts can never be 100% safe in the event of your institution’s insolvency, your traditional bank and brokerage and your 401(k) plan offer greater levels of guaranteed protections for your money than a crypto account.

Investors were reminded of this difference when Coinbase, a public crypto trading and storage platform, disclosed last month that if it were ever to go bankrupt, clients could be treated as unsecured creditors by a bankruptcy court, meaning they could lose their crypto investments.
“It is possible, though unlikely, that a court could decide to treat customer assets as part of the business in a bankruptcy proceeding,” Coinbase CEO Brian Armstrong said in a statement. a statement. tweet thread may’s beginning.
But company executives have noted that he is not at risk of bankruptcy and client “the funds are safeThe company also said it has updated its Retail User Agreement to clarify that customer assets are separate from – and not to be confused with – company assets.

Still, in bankruptcy, “a judge will rely on what the law says, not what you put in your retail user agreement,” said bankruptcy attorney Alan Rosenberg. But, he added, “it is impossible to predict what would happen [because] the case law is very limited.”

Indeed, the legal, tax and regulatory frameworks for digital assets – not to mention the legal definitions of what a specific cryptocurrency is – are still being worked out. They are not legal tender and are not always considered securities.

That’s partly why they don’t have the same safeguards as more traditional financial accounts.

So read the legal fine print before buying, selling or storing digital assets with any company that facilitates crypto trading to see what protections they offer.

Since Coinbase is publicly traded and therefore needs to be more transparent than private companies, its promises and guarantees are likely to be some of the best offered to those looking to invest in crypto.

For investments and savings in which you would like to have a greater sense of security, here are some of the main protections offered by traditional financial accounts.

Bank accounts and credit unions

If you have a checking or savings account, money market deposit account, or certificates of deposit with a bank or credit union, make sure the institution has deposit insurance .

Banks are generally insured by the Federal Deposit Insurance Corporation (FDIC). If your bank goes bankrupt, it cover will protect up to $250,000 per depositor for each category of account ownership at an FDIC-insured bank. There are several types of deposit accounts you can have at a bank (e.g. personal account, business account, etc.) and each would be covered separately. Plus, if you own an account jointly, each owner is covered up to $250,000. (Use this FDIC calculator to determine your coverage based on the specifics of your situation.)
And if you have deposits in a self-directed retirement account at a federally insured bank, they would also receive up to $250,000 in protection.
Credit unions that are federally insured provide the same level of coverage through the National Administration of Credit Unions (NCUA).

Brokerage accounts

If you have an IRA or taxable stock and bond account with a registered nonprofit member broker Securities Investor Protection Societyyou will receive up to $500,000 in protection if that brokerage fails.

Up to half of this amount can be used to protect your account cash associated with your securities – for example, if you just sold stocks and left the proceeds in your account at the brokerage.

In addition to SIPC insurance, a brokerage may provide additional protection for its clients through private insurers like Lloyd’s of London.

Additionally, the Securities and Exchange Commission issued a Client protection rule which requires registered brokers to safeguard clients’ securities and cash, prohibiting brokers from using clients’ money to fund corporate overhead or business operations.


If your employer goes bankrupt, legally your 401(k) money cannot be treated as business assets by a bankruptcy court.

“[The Employee Retirement Income Security Act] protects 401(k) assets that have been filed and are fully vested if the employer declares bankruptcy,” said Hattie Greenan, spokesperson for the Plan Sponsor Council of America.


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