Crypto Exchange USD Advertised as FDIC Insured, Not So Fast

Many crypto exchanges including Coinbase, Gemini, and Voyager (pour one out) advertise that USD kept on the exchange is FDIC insured. This is technically correct, but YOU are not the insured party.

The USD is held in an omnibus account in the exchanges name (essentially a combined account that does not identify the individual holders). This means that the exchange has FDIC insurance and technically, you as an individual do not. You rely on the exchange passing the insurance onto you which they are not required to do. The money is insured under their name not yours.

If an exchange went bankrupt that you had USD in, you would be a creditor and would have to go through the bankruptcy process to get the USD back.

I have yet to find an exchange that lists USD as being FDIC insured that the USD is actually insured in your name and not an omnibus account under the exchanges name.