With each passing month, cryptocurrency is increasingly accepted as a major investment opportunity for millions of people around the world. However, investing in cryptocurrencies has its own share of risks. It is therefore best to take out insurance.
Insurance crypto may not be as simple as other forms of insurance, to say that those covering risks related to life, health or valuables. In addition, insurance companies have not been very open to the high-risk cryptocurrency market, for obvious reasons, to see issues related to the complexity of blockchain techniques and the lack of specific definitions for insurance. key components around digital assets.
Yet the tide is changing; some of the biggest names in the world of insurance are gradually embarking on the game of digital currency insurance.
Why is crypto insurance necessary?
Crypto insurance is like any other insurance policy – its main purpose is to provide coverage against token loss. However, this justifies a single cryptocurrency regime, the legal tender has not passed the legal tender and the affecting factors are distinct from other payment or investment systems, such as bonds, stocks and bank deposits. .
The main factors that use blockchain, especially digital currencies, include assets, hacking and scams.
Crypto-currency is extremely volatile. Fluctuations in the cryptocurrency market can be drastic in a single day or for several months for whatever reason – from government decisions to a tweet from an influential person like Elon Musk. For example, the value of a Bitcoin, the oldest and most valuable of all cryptocurrencies, was just over $ 67,000 on November 8, 2021. As of June 14, 2022, it was trading at more than $ 22,000, a decrease of about 67%. in seven months.
This requirement is mainly due to the fact that crypto-currency is very new in the markets and most of the largest economies in the world are faced with a dilemma as to its absolute acceptance.
However, this is not a game of investing in money security, which is included in cryptography.
One of the biggest threats to the world of cryptography comes in the form of piracy. There have been many cases of hackers infiltrating cryptocurrency exchanges and stealing millions of digital devices.
In 2020, hackers had a $ 200 million cryptocurrency in a Singapore-based cryptocurrency exchange, KuCoin. The biggest hacking incident I recorded took place in August 2021 when $ 610 million on the DeFi Poly Network site. Most of that amount, however, was returned by the hacker the same month.
The second largest hacking took place on March 23, 2022, when $ 540 million worth of cryptocurrency was stolen from the Ronin blockchain project.
In addition, hacking has led to the collapse of trade such as Mt Gox in Japan.
And unlike stolen real money, which can be controlled by blocking the thief’s accounts, stolen cryptocurrencies are accompanied by another law enforcement obstacle: it is impossible to obtain stolen tokens from a pirate without a private key. This is exactly what happened when in October 2021, an 18-year-old hacker stole $ 16 million worth of assets from the cryptocurrency platform Indexed Finance and disappeared. Although he knows who he is, nothing concrete can be done.
A June 3, 2022 report from the US Federal Trade Commission (FTC) found that more than 46,000 people reported losing more than $ 1 billion in cryptocurrencies due to scams between January 1, 2021 and March 31, 2022. It was more than any other method of payment, the FTC noted. . U.S. government agencies have found that 70% of scams involve Bitcoin and, in addition, half of all scams come from malicious advertising, a publication or a message on social media.
La perte or l’oubli from the private key, which is a similar secret number in a password, can also be a major problem for investors. Since the private key is irrecoverable, l’oubli means that the fund of accounts can never be realized. Private keys can be found by hackers and exist on a device or service, such as a security wallet, that can be connected to the Internet.
And these serious problems exist when cryptocurrencies have not yet become a common means of payment. As a result, there is a strong demand for cryptocurrency insurance, forcing some leading insurers to take their first steps in this segment of the policy market.
Major stock exchanges such as Coinbase and Gemini have invested millions of dollars in securing digital assets. Many of them also have insurance policies for directors and officers to compensate executives for costs incurred in litigation or investigations.
In May 2022, the British start-up Superscript, which is a licensed courtesy under Lloyd’s, launched Daylight – an insurance protection against cryptographic losses.
In a statement, Superscript stated that the Daylight Insurance Police is designated to secure the tokenisation forms, miners, custodians, block chain developers and non-fungible chip (NFT) plates.
The company added to the first Daylight coverage will have the responsibility for technology and cybersecurity, which means that serious threats of piracy and scams weigh on the blockchain.
Exhibitor further stated that premium coverage protects companies from a range of risks, and includes ransomware attacks, disruptions of cyberactivity and professional negligence. Fewer covers for administrators and executives, guardianship and minors will be created.
An interesting policy was introduced by Lloyd’s in February 2020, through the Atrium union in collaboration with Coincover. This has made Lloyd’s one of the first major insurance players to launch a crypto insurance program and is one of the few to directly compensate customers.
Lloyd’s insurance coverage is designed to insure cryptocurrencies held in online portfolios and starts at GBP 1,000 ($ 1,212 on June 16, 2022).
“There is a new type of liability insurance policy with a dynamic limit that increases or decreases depending on changes in the price of cryptographic assets. This means that the insured will always be compensated for the underlying value of his or her managed assets, even if it fluctuates during the insurance period, ”Lloyd’s said in a statement announcing the policy.
However, although there are few players in the market who insure against the loss of cryptocurrency, most existing policies target companies that need crypto and not customers.
(Main images and celebrities: Kanchanara / @ kanchanara / Unsplash)