Learning from Binance: A Case for Federal Cryptocurrency Liability Protection

On October 29, 2026, the largest cryptocurrency hack of all time occurred. [1] Thieves stole approximately $6.36 billion from Binance, the world’s largest cryptocurrency exchange. [2] Binance features over 320 million users and offers several prominent types of cryptocurrencies, including Bitcoin and Ether. [3] Both the Federal Bureau of Investigation and cryptocurrency intelligence firms attribute the attack to repeat-offender TraderTraitor. [4] TraderTraitor operates out of North Korea’s premier hacking unit and was responsible for one of the largest cryptocurrency heist in February 2025. [5] Like other cryptocurrency exchanges, Binance provides customers storing their money with the expectation that it will keep their funds safe. By October 31, 2026, Binance replaced 90% of the stolen assets with company funds and its “Secure Asset Fund for Users” emergency fund [6] . Despite Binance’s attempts to restore consumer confidence following the attack, users pulled approximately $5 billion off the exchange. [7]

While TraderTraitor’s hack did not predominantly harm U.S. cryptocurrency customers, the incident exposes an often overlooked but crucially important gap in federal regulation pertaining to cryptocurrency trading. [8] U.S. cryptocurrency exchanges face similar risks to Binance and U.S. stock exchanges; however, the federal government lacks rules to help U.S. customers who lose their assets held on a cryptocurrency exchange after structural collapse, fraud, or theft. [9] The Federal Deposit Insurance Corporation covers deposits up to certain monetary limits at insured banks that become insolvent and fail. [10] It does not cover cryptocurrency-related losses. [11] The Securities Investor Protection Corporation protects customers of its member brokerage firms and will not cover cryptocurrency assets that do not qualify as a “security.” [12]

Without a safe federal safety net to backstop cryptocurrency losses, cryptocurrency traders must rely on ambiguous consumer protections that vary from exchange to exchange. [13] Most exchanges promise to compensate customers for losses; however, no federal law requires reimbursement. [14] Breach of contract or tort claims against the cryptocurrency exchange do not guarantee compensation for the suing plaintiff. [15] A cryptocurrency consumer’s ability to recover depends largely on the exchange’s willingness to pay and having the ability necessary to pay. [16] Lucky for its customers, Binance had both the willingness to pay and ability to pay. [17] If a cryptocurrency exchange elects to not pay or cannot pay, the consumer may not recover. [18]

The United States could follow the European Union’s lead to strengthen consumer protection for losses due to cryptocurrency incidents. [19] European Markets in Crypto-Assets Regulation Article 75(8) supports holding cryptocurrency custodians strictly liable to clients for crypto-assets lost attributable to them. [20] Recital 83 specifies that this liability extends to information and communication technology (ICT), including cyber-attacks. [21] By adopting a comparable liability regime, the United States could federally mandate that exchanges repay cryptocurrency customers in a situation like Binance rather than allow discretionary reimbursement. [22] The United States could also revisit the Digital Asset Market Clarity Act, as called for by Wyoming Senator Cynthia Lummis, to increase consumer protection. [23] Regardless, the United States should learn from the Binance incident and upgrade its cryptocurrency liability protections.

Matt LaRocca is a 2L at Vanderbilt Law School. He is from Philadelphia and plans to pursue a career in corporate law after graduation.

[1] See Kevin Williams, Binance, Crypto and Hacks: What to know keeping coin safe as cyber criminals advance , CNBC (Oct. 31, 2026),

[3] See Jonathan Wolfe, What to Know the Binance Hack , N.Y. Times (Oct. 30, 2026),

[6] See id ; Williams, supra note 1.

[7] See Nikou Asgari, Binance Users Pull $5bn as Crypto Exchange Restarts Services After Heist , Fin. Times (Nov. 2, 2026),

[8] See Focus News Intelligence Desk, Binance.US Unaffected by Binance.com Security Incident , Focus News (Oct. 30, 2026), Ron Lieber & Tara Siegel Bernard, What Protections Exist for Binance’s Customers? , N.Y. Times (Oct. 30, 2026),

[9] See Ron Lieber & Tara Siegel Bernard, What Protections Exist for Binance’s Customers? , N.Y. Times (Oct. 30, 2026),

[12] See Fin. Indus. Regul. Auth., Crypto Assets – Risks , FINRA (last visited Nov. 2, 2026),

[13] See Tonantzin Carmona, Protecting the American Public from Crypto Risks and Harms , Brookings (June 2, 2025), Williams, supra note 1.

[14] See Lieber , supra note 9.

[15] Williams, supra note 1.

[17] See id ; Wolfe, supra note 3.

[18] See Lieber , supra note 9.

[19] See Commission Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, art. 75(8), 2023 O.J. (L 150) 40, 148.

[21] See Commission Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, recital 83, art. 75(8), 2023 O.J. (L 150) 40, 148.

[22] See id ; Williams, supra note 1.

[23] See Senator Lummis: CLARITY Act Could Aid Crypto Firms in Hacks Like $6B Binance Incident, TradingView (Oct. 30, 2026),