Crypto Insurance Is Complicated But Coinbase Can Offer A Viable Solution
Now that institutional financial giants have started to venture into the Cryptocurrency ecosystem, it is important for them to feel safe and secure. Undoubtedly, the threat of theft and hacking is plaguing the markets of digital assets and securing a crypto insurance for your assets is touted to be an impossible task. However, Coinbase can offer a viable solution to the issue, as shared by CoinDesk in an article.
The underlying risks involved with the cryptocurrencies have investors and companies doubtfull towards investing in the ecosystem. Their greatest fear if of theft and not getting chargebacks for their investments. The article notes that the “opaque market” of the insurance industry does not want to insure too much money. The Insurance industry tops out at $6 billion, which is like a drop in the bucket, as just the top three exchanges each handle more than $1 billion of trades a day.
Insurance in the crypto market is a very important aspect, as for whether the holder loses their keys or the hackers zaps it out of their wallets, the money is gone, like cash or jewellery pilfered from a safe.
The article elaborates that the crypto markets requires two distinct types of insurance products – the commercial crime market and the specie market.
In this particular market, the commercial crime market offers coverage for “hot” wallets, where the keys are in a device connected to the internet. While the specie market, that has traditionally insured vaults or premises with high-value items offers a cover quite similar to cold storages, where the private keys to a wallet are kept on a piece of paper or an offline device.
San Francisco-based Coinbase is amongst the biggest crypto exchanges and has been active in obtaining crypto insurance since 2013, and that the market is still in its infancy. The company’s vice president of security at Coinbase, Philip Martin, did not disclose the numbers but did acknowledge that they are one of the market’s largest consumers. Martin stated:
“We are definitely at the high end of coverage in this space … There’s not yet a ton of capacity.”
However, Greg Spore, US placement leader, financial and professional practice at insurance broker Marsh, asked to take such claims with a grain of salt. He told the CoinDesk:
“You do hear rumors in the market that an insured [party] could, for their own reasons, want to promote that they have more limits than they have; maybe their customers get a sense of comfort if they have greater limits and so maybe the stated limit is $200 million.”
Notably, a large exchange like coinbase probably employs both the crime and specie insurances. The specie consortiums that can offer a protection to cover up to $660 million USD in cold storage, but this is not enough for most companies and it is even unlikely that a company could get that amount. Hot storage capacity would not even approach $200 million USD, for instance, which is simply not enough.
Insurance for cryptos is expensive and sometimes not that useful but it is surely a necessity. Moreover, many insuarance companies do not extend their hand towards the ecosystem as a lot of tailoring would be required to their policies.
The London based, centuries-old company, Lloyd, one of the biggest ones in the market today is the best bet according to many. Last year some 85 Lloyd’s syndicates, comprised of corporations and individuals, collectively wrote $43.3 billion of gross premiums covering a wide range of property and liability.
Notably, Brokers have been working with Lloyd’s to educate underwriters and show that crypto insurance presents a significant opportunity to the London market (which last year took a battering thanks to numerous hurricanes and wildfires).
The CoinDesk article concludes that a congregation of Coinbase and Lloyd would be the most viable way for ensuring that the crypto products in the market achieve secure insurance in the ecosystem.
The idea of expressing one’s views and reviews through words is beyond intriguing. What started as a creative let out has now become a passion and a profession for Arshmeet K Hora. In her own words ” with every word, every article that I write, my passion towards this medium has grown stronger.” Arshmeet covers latest crypto news and updates as well as what happening new revolving around Blockchain Technology.