Bitcoin Hacks: Why Exchanges Don’t Insure Bitcoin Deposits

NEW YORK (InsideBitcoins) – With all of the bitcoin exchange hacks that take place on a regular basis, one has to wonder why certain consumer protections have not been put into place at the largest exchanges in the world. Traders will continue to use centralized exchanges that don’t offer any kind of insurance for bitcoin deposits because those traders want to have instant access to the trading engine for buy and sell orders.
[Read More: How Bitcoin Exchanges Should Secure Their Wallets] Having said that, one would assume that at least a handful of exchanges would offer insured bitcoin deposits in an attempt to give traders peace of mind. Sadly, it seems insured bitcoin deposits are the Voldemort of bitcoin exchanges – the concept that shall not be named.
Exchanges don’t want to talk about insurance
Generally speaking, bitcoin exchanges do not want to even mention the idea of insured deposits. Nearly all exchanges make no mention of insurance for deposits on their websites, although the lack of insurance is sometimes mentioned on the Terms and Conditions page. Coinbase is one of the few exchanges that describes their insurance policy on their website, and it should be noted that only bitcoins in ‘online storage’ are insured at Coinbase. When I asked Coinbase why full coverage is not offered, a PR representative responded by saying, ‘Any information we have to share around insurance is available [on our website].’

This post was published at Inside Bitcoins on Feb 19, 2015.