ScienceLovers -Along with the development of public investment facilities in the midst of digital developments, crypto assets are one of th...
This of course increases the activity of the crypto asset market so that its valuation also increases. This condition then raises the question: should you as an investor have insurance for your crypto assets?
Unlike other investments, in order to exchange crypto assets, you are not required to insure them.
Therefore, at this time crypto asset insurance is only an option.
To answer the previous question above, it's good to understand other types of investment means insurance.
General Investment Insurance
Federal Deposit Insurance Corporation (FDIC)
The Federal Deposit Insurance Corporation is a global institution originating from the United States that protects your deposits in the bank if your bank is unable to meet its obligations.
Each user of this institution's services will be protected by a maximum of 25 thousand US dollars per person per bank.
In Indonesia, there is a Deposit Insurance Corporation (LPS) with a similar function, so there is a lot of collaboration between IDIC and FDIC.
Securities Investor Protection Corporation (SIPC)
Securities Investor Protection Corporation (SIPC) is a non-profit organization from the United States that provides protection for your investments from intermediaries who hold your investments.
The insurance that SIPC provides for your investment can reach up to 500 thousand US dollars for the security of your investment including 250 thousand US dollars as a cash deposit.
However, if you are a user of SIPC services, your bad decision in investing or your choice of investment vehicle that does not have the potential to increase in value will not be protected by SIPC.
Crypto Asset Insurance
However, both FDIC and SIPC do not offer protection for your crypto asset investments in the form of insurance.
This is because investing in crypto assets is considered to have risks that fiat money investments or other safe haven investments do not have.
One of them is the safety factor. Since most crypto asset investments are in the digital world accessed by the internet, this investment is very different from most other investment vehicles that are under the supervision of an institution.
Even though the blockchain technology used to trade crypto assets is difficult to hack, your own investment has its own possibilities.
One of them is the public key and private key used to access a crypto asset.
There are still many who do not understand the importance of the confidentiality of these keys. If viewed by other parties, the crypto assets can be accessed by other than the owner.
Unlike other investments, crypto asset investments that occur in the blockchain ecosystem cannot be changed again once they change hands.
If you invest another asset such as fiat money in a bank and the investment is hacked into changing hands, the transaction can be reversed and returned to your account.
Is Crypto Asset Insurance Needed?
The same security reasons also make insurance of your crypto assets very important. The first insurance company to offer crypto asset insurance services in the United States was Great American Insurance Group.
Reported by Finivi, Great American Insurance Group announced in mid-2014 that it would offer insurance services against Bitcoin as support for existing policies for merchants and government customers who accept Bitcoin as a means of payment.
However, until now there are still few who use crypto asset insurance services.
According to Coindesk, the total insured crypto assets were only about 6 billion US dollars in November 2020.
In fact, there are around 140 billion US dollars of crypto assets circulating in the market at the same time or around 2,030 trillion rupiah. This means that only about 4.2 percent of crypto assets are insured.
By insuring your crypto assets, you have one less factor to worry about. You can live more focused investment and trading activities in crypto assets so that you can get maximum profit.
Protect Users from Hackers, Binance Crypto Platform Forms Insurance Fund
The largest crypto asset trading platform, Binance Holdings Ltd., created a US$1 billion insurance fund for its users following a series of hacks on its platform.
Reported by Bloomberg on Monday (31/1/2022), Binance, which also issues Binance coin (BNB) has been allocating money for an emergency portfolio since July 2018 and recently consolidated its funds into one place.
The effort marks an effort to combat concerns from users after a series of cyberattacks, including on Binance in 2019.
Earlier this month, Crypto.com noted a user account that held $34 million worth of crypto assets and the money was withdrawn without the owner's permission.
Hackers managed to break into more than US$80 million in digital assets from the Qubit Finance blockchain extension last week.
“At Binance we have always said funds will be safe and today the Binance Secure Asset Fund is acting as an effective safeguard for users,” said Chief Executive Officer (CEO) Changpeng (CZ) Zhao in a note.
The fund is worth $1 billion based on its January 29 opening price.
Cryptocurrency enthusiasts have been alarmed by cybersecurity breaches on a number of trading platforms. It also led the company to suspend its services to fix network vulnerabilities.
This is a warning from a system where crypto transactions can only be traced to an anonymous serial code, not personal identification.
That is why it is important for owners or investors to choose a safe platform to buy their digital coins. Some digital wallet exchanges now have insurance policies to protect user assets from theft in the event of a hack.
You can store coins in a hot wallet, or online, a software-based storage platform. However, because hot wallets are online, they are still vulnerable to hackers.
The least hackable form of security is storing on a completely offline wallet. It's risky like device damage.
