Frequent Thefts Pave The Way For Crypto Insurance
March 6, 2019 1:12 pm
Cryptocurrency hacks have been an ongoing menace for the past few years. In fact, hackers managed to steal $1.7 billion on digital currencies in 2018 alone. These malicious attacks simply end up further tainting the financial technology’s reputation.
However, all is not lost as these incidents have paved the way for cryptocurrency insurance. This insurance aims to instill confidence in large financial firms to embark in bigger stakes in digital currencies.
However, not everything is smooth sailing so far. For starters, a large portion of regulators are unsure towards the scope of insurance. While some think that cryptocurrencies fall outside the purview of insurance. There seems to be minimal oversight towards insured crypto at the moment.
Insurance aims to remedy the crypto reputation problem. At the time when this article was written, the gross value of combined cryptocurrencies is estimated at $130 billion. This information was provided by CoinMarketCap. Taking into account the theft of $1.7 billion stolen last year, it’s clear that hackers managed to steal over 1 percent of the total available cryptocurrencies. This might not seem much, but when you put these numbers into a fiat currency’s perspective, the stolen currency would amount to $1 trillion. This is based on the US estimate of total money that is currency in existence globally.
The alarming theft rates has led federal regulators to shy away from approving Bitcoin-based finds. The Security and Exchange Commission (SEC) to assume that such instances of theft will create increased volatility in the market.
Bitcoin enthusiasts are coping with the collapse of Quadriga Fintech Solutions Corporation, that used to be Canada’s largest cryptocurrency exchange. This was due to an unfortunate incident in which the founder unexpectedly passed away back in January. This led to the loss of $190 million in funds as the founder was the only person with access to the codes. Though this cannot be counted under theft, nevertheless, the cryptocurrency in that account is lost forever.
BlockRe, a Chicago-based company is looking to remedy this issue. Founded in 2017, the company hails as the first-ever digital asset insurance and risk mitigation company. Though it’s a fact that more established players are also offering similar services in existing markets.
“In light of the uncertain landscape concerning whether, and how, virtual currencies are insured, customers should demand more information from their trading platforms about how risks to virtual or fiat currency are insured against.”
There are multiple opinions on this problem. The Ohio regulators say that they are aware of the crypto insurance offerings, but the providers are not actively tracked. Meanwhile Pennsylvania states that crypto coverage will fall under filing requirements based on the type of offering.
“We are aware that this type of insurance exists but we have not seen any reference to cryptocurrency here in Pennsylvania. If it is offered as a large commercial product, it would be exempt from filing requirements but if it is offered as a small commercial product or a personal line, it would have to be filed through our department.” Pennsylvania’s office said.
BitGo is another service provider in the insurance landscape. It offers a “comprehensive” insurance at no charge for up to $100 million in digital currencies stored in cold storage.