This is the continuation of a series of posts I’ve been making on the Terms of Service (ToS) of exchanges. See the TL;DR for the exchanges in the title, but also for Binance, Kraken, Coinbase, Crypto.com, OKX, MEXC and Gate.io at the end.

After a judge has ruled that customer’s assets do not belong to them based on the bankrupt-firm’s ToS, I decided to check how deep we could go were one of the exchanges in the title to fail. I was looking specifically for insurance and/or ownership of the assets.

Huobi

No mention of insurance or ownership.

Their termination section reads:

Limitation and Exemption of Liability

8.1 You understand and agree that under no circumstance will we be held liable for any of the following events:

8.1.1 loss of income;

8.1.2 loss of transaction profits or contractual losses;

8.1.3 disruption of the business

8.1.4 loss of expected currency losses

8.1.5 loss of information

8.1.6 loss of opportunity, damage to goodwill or reputation

8.1.7 damage or loss of data;

8.1.8 cost of purchasing alternative products or services;

8.1.9 any indirect, special or incidental loss or damage arising from any infringement (including negligence), breach of contract or any other cause, regardless of whether or not such loss or damage may reasonably be foreseen by us, and regardless of whether or not we are notified in advance of the possibility of such loss or damage.

8.1.10 Items 8.1.1 to 8.1.9 are independent of each other.

So if they disrupt the service by going bankrupt, they can’t be held accountable (at least not according to their ToS). They’re also registered at the Republic of Seychelles. Keep this in mind.

ByBit

No mention of insurance nor ownership. In fact, the only mention about insurance is that there’s no insurance:

7.2 The Account is not a bank account and the Digital Assets held in the Account are not deposits or other financial products. Except as otherwise permitted by the Platform, no interest will be paid on any funds or Digital Assets under your Account, and all Digital Assets that are directly held by us for your benefit are not insured by any Governmental Authority.

And here’s the catch:

23.Suspicion or Termination in Whole or in Part

23.1 Access to the Platform may be suspended or terminated in whole or in part at any time either by the User or by us in accordance with the Terms. In addition, we reserve the right at our sole discretion to suspend or terminate immediately and without notice any User’s access to or use of the Site and the Platform if they violate any provision of these Terms or otherwise according to Section 23.2. Your access to the Platform will be automatically terminated upon termination of your Account. Sections 1, 2, 3, 6, 10-17, and 20-26 and any claims for breach of these Terms shall survive such termination.

[…]

23.7 The Company maintains full custody of the assets, funds and user data/information which may be turned over to Governmental Authorities in the event of your Account’s suspension or termination arising from fraud investigations, investigations of violation of law or violation of these Terms. We will not be liable to you, your Authorized Individuals and/or any third party for loss or damage suffered due to delay, transmission errors, technical faults or defects, breakdowns and illegal intrusion or intervention in the information provided and services offered, or any failures or delays in completing any orders or transactions using any Account. Similarly, we will not be liable for any loss or damage suffered due to delays, technical faults or interruptions in the availability of the Site, the Platform, or any Account (including maintenance work required by our systems).

So if you commit a mistake that they think that violates the terms, you’re off for a ride.

They do mention insurance on leverage positions, but it seems the insurance is for the company itself, not for the users:

19.Insurance Fund; Auto-Deleverage (ADL)

19.1 The Company maintains an insurance fund to cover the excessive losses caused by liquidated positions that are closed at worse than bankruptcy prices. The insurance fund is collected from the residual margin of liquidated positions that are closed at better than bankruptcy prices. The current balance of the insurance fund will be displayed on the Platform’s “Daily Insurance Fund Balance” page.

19.2 In extreme market conditions, however, if a position loss during a certain period of time has depleted the insurance fund, you agree that the Platform shall automatically deleverage the opposing position from the Users with the highest ADL ranking at the bankruptcy price of the liquidated order. […]

NEXO

No mention of ownership or insurance. Their section on termination of services reads:

XVIII. TERMINATION

This Agreement shall be terminated immediately by closing your Nexo Account, on the grounds of Art. XVII.2, Letter a) or otherwise, and discontinuing use of the Nexo Services. The Agreement can be terminated upon written notice by Nexo if Nexo discontinues the offering of the Nexo Services, regardless of the reasons. All your debts to Nexo shall have been settled and there shall be no balance in your Nexo Account prior to suspension or closing thereof. You are entitled to recover the remaining balance of Digital Assets together with the Interest accrued thereon, if applicable, respectively the fiat equivalence of the latter, unless we are prohibited by any Applicable Law or a court order to release such Digital Assets and Interest, if applicable, including but not limited to the case that we have reasonable grounds to suspect that the Digital Assets or the funds used for purchase of the Digital Assets were obtained through fraud or any unlawful means or connected with any criminal activities. Certain limitations may apply, as indicated in the Nexo Account and on the Nexo Platform, subject to revision from time to time, at our sole and absolute discretion. The termination of this Agreement shall not prevent any Party from seeking any remedies against the other Party for any breach of this Agreement occurring prior to such termination.

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TL;DR

None provide insurance against bankruptcy (at least not that I could find) None acknowledge one’s ownership of assets (at least not that I could find)

TL;DR (Binance, Kraken, Coinbase, OKX, Crypto.com, MEXC and Gate.io)

Kraken and Coinbase acknowledge that assets belong to users Binance does not say anything on ownership (at least not that I could find) I only found insurance information on Coinbase: all balance held in USD (fiat) is insured by default and up to $250,000, or up to $1M dollars for assets in fiat and crypto for Coinbase One users Crypto.com provides insurance up to $250,000 in the case of Unauthorized Transactions, subject to their opinion/take on whether it was really unauthorized or not OKX has a shady part where they reserve the right to deposit your money on their or a custodian’s name. If they go bankrupt, you have no claim whatsoever. MEXC and Gate.io do not acknowledge ownership nor do they have insurance

Table TL;DR

??? = No explicit mention whatsoever

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Exchange Ownership Insurance Coinbase Yes Fiat: $250k, $1M combined for CB One users Kraken Yes ??? Crypto.com ??? $250k for unauth. txs OKX No ??? Binance ??? ??? ByBit ??? ??? Gate.io ??? ??? Huobi ??? ??? MEXC ??? ??? Nexo ??? ???

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I’m not sure to what extent the assets would still be considered users’ property in the case of a bankruptcy filing, though.

Exchanges can change their ToS at anytime, so avoid leaving funds there for longer.

Use exchanges as exchanges. Buy a cold wallet and move your funds there.