Sciencelovers - Investors holding conventional securities, such as stocks or bonds, can count on a degree of protective regulation and insu...
While there is a demand for cryptocurrency insurance to cover everything from deposits to theft, the main concern is underwriting risk.
Large insurance companies do not feel they can accurately assess risk factors due to the lack of cohesive rules and regulations in the crypto insurance industry. While newer insurance companies jump in first, others are just dipping their toes to test the temperature.
Given this level of uncertainty in a growing industry, how do you know if your cryptocurrency is protected? And if not, can you insure it? Here's everything you need to know about the new world of cryptocurrency insurance.
Is my cryptocurrency insured by the US government?
no. The federal government provides insurance for cash and deposits of conventional securities, such as stocks and bonds, but not cryptocurrency assets 2; at least not yet.
The federal government's independent agency, the Federal Deposit Insurance Corporation, generally insures up to $250,000 per person, per bank. This includes all checking accounts, savings accounts, money market deposit accounts and certificates of deposit. Currently does not cover cryptocurrencies.
However, the FDIC is considering it. In an initiative called the Crypto Asset Policy Sprint, the FDIC has partnered with the Federal Reserve and the Office of Financial Supervisors to study cryptocurrencies and coordinate "policy on how and under what circumstances banks may engage in activities involving crypto assets," according to FDIC Chair Jelena. McWilliams. However, we don't know how long this process will take or whether the FDIC will decide to go into space at all.
Insurance for deposits in intermediary accounts for the purpose of purchasing securities is currently under the Securities Investor Protection Company. Representatives from SIPC and FDIC confirmed that currently no one insures crypto assets.
That means no federal protection for your cryptocurrency. As far as the government is concerned, you are alone.
Is there private insurance for cryptocurrencies?
Yes, but this is still a nascent industry, and its protection is very limited. “Most crypto assets today are not covered by insurance, and that is because of the relative immaturity of the cryptocurrency market,” said Brian O'Connell, an insurance analyst at Insurance Quotes.
The types of private crypto insurance that exist today are not targeted at consumers, but are mostly purchased by exchanges and crypto wallets. Coverage includes crime and theft, custodial insurance coverage and business insurance, although more types are in development, according to O'Connell.
The future of crypto insurance could include decentralized financial insurance (“DeFi”), which provides protection against loss of funds due to loss of private crypto keys or closure of service providers, O'Connell explained.
Since crypto insurance exists primarily at the exchange and wallet level, whether you are covered as a crypto buyer depends on the crypto service you use.
Do exchanges like Coinbase and wallets like Vesto insure your cryptocurrency?
Yes, but the scope is limited.
Coincover, an insurance-backed cryptocurrency protection platform, provides crypto protection for wallets – including Vesto, BitGo and Civic – through policies underwritten by Lloyd's of London and Aon.
This means you will be protected (based on the use of the wallet) against all theft and loss of cryptocurrency due to things like brute force attacks, cyber attacks, device theft and hacking.
You can also be insured through the crypto exchange you use. Coinbase, one of the largest US-based crypto exchanges, carries a $255 million crime insurance policy, according to O'Connell.
That coverage begins if Coinbase experiences a platform-wide cybersecurity breach. But if a hacker accesses your private account and steals your crypto, Coinbase insurance will not cover it. And in the event of a platform-wide cyberattack, you may still not get all your assets back. The Coinbase website explains that if the “total loss … exceeds insurance recovery … your funds may still be lost.”
Likewise, BlockFi and Bitstamp, two other crypto exchanges, carry crime insurance. BlockFi provides theft insurance through its main custodial wallet, Gemini.
Not only does Bitstamp have crime insurance with a total coverage of $300 million — its assets are also insured through the wallets it uses: BitGo and Copper. Bitstamp stores 95% of its digital assets offline in cold storage, which is unconnected to the internet and safer from hacking.
Binance.US and FTX, another popular exchange, did not respond to comment.
Can you buy private crypto-insurance?
Yes, but as far as we know, there is only one insurance company that includes direct-to-consumer offers: Coincover.
Coincover now offers private crypto theft protection, allowing you to purchase additional coverage beyond what your exchange or wallet has to offer.
Coincover's policy covers theft risks including hacking, device theft, phishing, malware, brute force attacks, and trojan software (which sends data to attackers). However, Coincover's policy does not cover blockchain failure, hardware loss or damage, or price fluctuations.
Coincover insurance policy prices range from $10 to $750, and with that range there are differences in coverage:
- $10 per year will get you $1,000 worth of coverage.
- $100 per year will give you $10,000 worth of protection.
- $750 a year will give you $100,000 worth of protection.
Other insurance companies haven't entered the direct-to-consumer arena just yet.
We contacted national insurance companies such as Allstate and State Farm, both of whom confirmed that they do not offer crypto-insurance at this time.
In addition, the big players entering the crypto-insurance industry also don't appear to be selling individual policies to consumers.
For example, Great American Insurance Group, the first insurance company to provide crypto-insurance, does not offer crypto-insurance directly to consumers. According to O'Connell, the company Etherisc is developing crypto wallet insurance for other insurance companies to cover crypto assets.
The future of the industry
The 21st century saw the rise of digital assets, and the crypto insurance industry started to emerge along with it. Although it has great potential, it is not yet mature enough.
“Right now, cryptocurrencies are a major risk for insurers, largely because of their unregulated status,” O'Connell said. "It's still a Wild West atmosphere and that's the coverage environment the insurance industry doesn't like."
Given the limited scope currently available, you may want to brush up on crypto security measures and actions to take if your crypto is stolen.
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