That is interesting. I read: "Even if Coinbase were to become insolvent, the funds held in the custodial bank accounts could not be claimed by Coinbase or its creditors. The funds held in those accounts would be returnable to Coinbase’s customers."

Which sounds like what I would want to hear as a customer. However in context, that refers specifically to "fiat currency" only. So I would have to assume that whatever the insurance does, it doesn't protect me in the same way with respect to digital currency...?

Of course, I have never been in a situation where SIPC insurance mattered, so I don't have that to compare to.

But the level of risk here is not clear to me, and the language suggests it could be different from what I think of as normal.

I think the fair market value of the coins in USD are insured, not the actual crypto currency / bitcoins. Much like insuring a ring - the insurance company doesn't stock pile rings. They pay out cash upon a claim.