Is crypto more secure than banks

Banks have been the backbone of finance for centuries. Crypto is rewriting the rules. Both claim to be secure. But they define security in very different ways.

This article explores how banks and crypto define security, where each fall short, and why crypto, with the right protection in place, is emerging as the preferred choice.  

Defining ‘security’ in banking vs. crypto 

In banking, security is institution-led. Fraud detection, transaction monitoring, and insurance mechanisms are designed to shield customers from loss. If something goes wrong, banks assume responsibility through regulation and legal recourse. 

In crypto, however, security is grounded in cryptography and decentralisation. Users safeguard their funds through private keys, while blockchain consensus ensures data integrity. Transactions are irreversible, making user diligence critical. Both systems offer security, but they operate on opposite ends of the spectrum: banks prioritise institutional accountability, while crypto emphasises individual sovereignty. This contrast sets the foundation for comparing bank vs blockchain security. 

How banks protect customer funds 

Banker: “Banks have been around for centuries. We built the global financial system. We’re trusted, regulated, and insured. If something goes wrong, customers know they’re protected.” 

Banks present themselves as safe havens. They want customers to feel reassured that if something goes wrong, someone is there to put it right. For centuries, they’ve been the custodians of money. Customers hand over control in exchange for promises of protection. 

Deposit insurance 

Take deposit insurance. In the UK, the Financial Services Compensation Scheme (FSCS) guarantees deposits up to £85,000. In the US, the Federal Deposit Insurance Corporation (FDIC) protects up to $250,000. These protections mean that if your bank collapses, you don’t lose everything. Customers saw the value of this during the Silicon Valley Bank collapse in 2023, when regulators stepped in to protect depositors and prevent contagion across the financial system. 

Fraud detection 

Banks also rely on fraud detection systems. If your debit card is cloned or your online banking is compromised, the bank steps in. Sophisticated AI-driven systems flag unusual activity. Call centers contact customers to confirm suspicious transactions. In most cases, funds are reimbursed. For many, this provides peace of mind. 

Regulation 

And of course, banks are backed by regulation. They are required to hold minimum reserves, follow anti-money laundering rules, and are subject to regular stress testing by central banks. This web of oversight creates systemic stability. From a banker’s perspective, this is what security means: resilience built on legal frameworks, institutional trust, and government guarantees. 

But here’s the problem. Those guarantees are limited. Deposit insurance has caps. Fraud protection often works after the fact, not before. And systemic crises show how fragile banks can be. The 2008 financial crisis nearly brought down the global economy, wiping out billions in value and leaving taxpayers footing the bill for bailouts. 

How crypto platforms secure value differently  

Crypto expert: “Customers don’t see what happens inside banks until there’s a crisis. By contrast, blockchain offers radical transparency. Every transaction is public, permanent, and auditable in real time. The FTX collapse was a reminder of what happens when businesses hide risk. The underlying technology has never failed.” 

Crypto flips the script. Instead of trust in institutions, it offers trust in code. Operating on decentralised blockchain networks, crypto enables near-instant, low-cost, peer-to-peer transactions across borders. With only a smartphone and an internet connection, anyone can access a crypto wallet and join the global financial system. 

No single point of failure 

At the heart of crypto’s security is decentralisation. A traditional bank has a single point of failure. If that institution fails, whether through bankruptcy, fraud, or cyberattack, customers bear the risk. By contrast, leading cryptocurrencies like Bitcoin and Ethereum run on thousands of nodes around the world. There’s no central server to hack, no CEO to corrupt, no government that can shut it down. The system is resilient by design. 

Transparency 

Another critical feature is transparency. Every transaction on a public blockchain is recorded permanently and can be verified by anyone. Compare this to traditional banking, where much happens behind closed doors. In 2022, the collapse of FTX, while not a failure of blockchain itself, revealed how lack of transparency in centralised exchanges can be devastating. By contrast, blockchain protocols like Bitcoin have run flawlessly for more than a decade, with every movement traceable on-chain. 

Crypto security  

Finally, there’s cryptographic security. Ownership of crypto assets comes down to private keys. If you hold the keys, you control the funds. No bank manager can freeze your account. No government can devalue your holdings overnight. This sovereignty is powerful. It allows anyone, anywhere in the world, to own and move assets with just a smartphone. For people in countries with unstable financial systems; think Venezuela or Zimbabwe; this level of control can be life changing. 

Critics point out the risks: exchanges get hacked, phishing scams trick users, and lost keys mean lost funds. These risks are real. But it’s important to note they are not failures of blockchain technology itself. They are failures of how individuals and companies manage access. And that’s exactly where the next evolution of crypto security comes in. 

What happens when something goes wrong? 

The difference between banks and crypto becomes clearest in moments of crisis. In banking, fraud can often be undone; call the bank, dispute the charge, and funds may be returned. Passwords can be reset with the right identity checks, and even in the rare case of bank failure, insured deposits are refunded. 

In crypto, consequences are more final. Stolen funds are rarely recoverable without prior safeguards, and losing a private key often means assets are inaccessible forever. If an exchange is hacked, the outcome depends entirely on whether custodial wallets were insured or protected. Responsibility lies with the user or institution from the outset, and mistakes often carry irreversible consequences. 

The role of non-custodial wallet protection 

Non-custodial wallets are central to the philosophy of decentralised finance. They provide complete ownership of digital assets, free from institutional control. This offers enormous benefits: no counterparty risk, full transparency, and greater autonomy. But there are trade-offs. With ownership comes responsibility, and without external safety nets, users who lose access to their keys may face permanent loss. 

This is where non-custodial wallet protection becomes critical. By introducing recovery and threat-mitigation tools, users can enjoy the benefits of self-sovereignty while reducing the risks of permanent loss or theft. For institutions, solutions like institutional wallet recovery combine decentralised asset protection with operational resilience, offering a model that feels closer to banking assurance without sacrificing independence. 

Conclusion 

The truth is, both systems have weaknesses. Banks can fail at scale. Crypto puts responsibility on the individual. But only one system is improving at speed and that’s crypto. 

Banks are bound by bureaucracy and legacy systems. Fraud is still rampant: UK Finance reported over £1.1 billion lost to fraud in the UK in 2024 alone. Deposit insurance, while useful, is capped and doesn’t cover all scenarios. And in a global crisis, customers are reminded that their money isn’t always as safe as it feels. 

Crypto, by contrast, evolves quickly. The protocols themselves have proven remarkably robust. Bitcoin has never been hacked at the blockchain level. Ethereum continues to process billions in transactions daily. The risks lie not in the networks, but in how individuals secure access. This is where the industry is innovating. Hardware wallets, multi-signature solutions, and institutional-grade custody are raising the bar. 

The CoinCover advantage 

At CoinCover, we believe crypto can be and should be safer than banks. We exist to provide that missing layer of protection. The common critique of crypto has always been: “What happens if I lose my keys?” or “What if my exchange is hacked?”  

With CoinCover, those concerns no longer apply. Crypto holders can have the sovereignty and transparency of blockchain with the safety net of protection and recovery. Get in touch with us today to discuss your firm’s - or your customers’ - recovery requirements.