Cryptocurrencies have grown by leaps and bounds in recent years. Despite skepticism, the asset class has emerged as an opportunity for varied investors as they see a lot of potential. Then some are not so friendly regarding crypto.
And now, crypto insurance might come to the rescue for such folks, although crypto insurance may not be as easy as it sounds, or like the other forms of insurance giving life security, health, etc.
Furthermore, the insurance companies have not really talked publicly about the volatile and risky crypto space. This can be due to their lack of understanding the blockchain technology and the lack of particular insurance definitions of primary elements revolving around the asset class.
Still, certain prominent names in the insurance sphere are steadily getting into the idea of ensuring cryptocurrencies.
What Is Crypto Insurance?
Crypto Insurance is basically akin to other insurance policies, but they would cover for loss of tokens. Although it tends to warrant a unique insurance scheme as digital assets are not a legal tender and the factors that affect them are also way different from others like bonds, bank deposits, and stocks.
But What Is The Need for Crypto Insurance?
To understand the necessity of insurance for cryptocurrencies, it is important to know the key reasons crypto is affected.
High Volatility: Crypto can be affected by a single Tweet from a popular entity or a government decision. These price fluctuations could happen in a single day or month. For instance, last year, the meme currency Dogecoin gained major traction as Elon Musk tweeted about the token several times in the year.
Frauds: Cryptocurrencies have never been free from fraud too. A recent report by the US Federal Trade Commission highlighted that more than 46,000 people have reported losing more than $1 Billion in digital assets to frauds in the Q1 of 2022.
Furthermore, 70% of frauds included the crowned cryptocurrency Bitcoin (BTC). And over half of the frauds resulted from some malicious ad, post, or social media message.
Frauds also result from the fact that sometimes an individual forgets their private key (like a password), which is irrecoverable. Unethical actors can also steal them.
Hacks And Attacks: Varied crypto platforms and crypto exchanges have also experienced attacks and hacks in the past, which often result in investors losing their funds.
Would Crypto Insurance Act As A Saviour?
Popular exchanges like Gemini and Coinbase have invested massive funds in crypto insurance.
In May, Superscript, the UK Start-up, a licensed broker under Lloyd’s, rolled out Daylight insurance protection on crypto losses. Superscript highlighted in a statement that the Daylight insurance policy is designed to secure tokenization platforms, custodians, miners, blockchain developers, and NFT platforms.
And that the first covers would protect entities from an array of risks comprising cyber business interruption, ransomware attacks, and professional negligence. And the covers for custodianship, directors, and officers, and miners would be rolled out later.
Whereas Lloyd’s launched a policy in February 2020 via its syndicate Atrium along with Coincover. And this placed Lloyd’s among the earliest primary insurance players to initiate a crypto-insurance scheme.
The Lloyd’s insurance cover is made to ensure digital assets are held in online wallets and starts from GBP 1,000.
Although there is a certain bump in the smooth road of crypto insurance, first, few players in the space aim to insure against the loss of tokens. And secondly, most of these players focus on businesses that deal with digital assets rather than focusing on customers.
Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.
Source: https://www.thecoinrepublic.com/2022/06/17/do-you-have-skepticisms-over-crypto-crypto-insurance-is-here-for-the-rescue/