- Cryptocurrency is difficult to insure, so it’s expensive for businesses to get insurance and "If you do get it, it's probably so narrowly written that it wouldn't be useful in a bad event anyway".
- Technology exists that can dramatically reduce some of the controllable risks of holding cryptocurrency.
- Real-time cryptocurrency theft protection technology can prevent unauthorised transactions by integrating with business systems to add a crucial measure before broadcast to the blockchain.
- Our theft protection technology is insured at Lloyd’s of London, so we will compensate customers for losses that our technology does not prevent as set out in our agreement.
- Cryptocurrency disaster recovery technology securely backs-up private keys without ever exposing them to a third party (including us), so you still have options even if you lose a key.
- Download The Definitive Guide to Crypto Protection to find out more.
It’s no secret that getting insurance for cryptocurrency is difficult and expensive. Fortunately, new technology is here to help solve this problem. And not just solve it, but to make insurance a footnote in what anyone wanting to de-risk cryptocurrency should be looking for.
More on that later.
First, let's look at this from the perspective of a crypto asset manager. A few days after first publishing this article here, The Block published this: Crypto companies are finally looking to buy insurance. But are the policies out there worthwhile?
As part of that, David Siemer, CEO of Wave Financial, commented on getting insurance as a crypto asset management company:
"If you're an early-stage startup, you don't have a million dollars a year for just D&O insurance... so, I know a very few companies in crypto that actually have that."
He comments further:
"If you do get it, it's probably so narrowly written that it wouldn't be useful in a bad event anyway... You're paying an enormous premium for very weak insurance in almost every case."
It's an interesting article well worth a read, but it misses a solution which we'll cover shortly.
For now, let’s have a quick look at it from the perspective of insurers and see why it’s so difficult and expensive to insure cryptocurrency risk.
Insurers don’t like to vary the value of policies as prices fluctuate because it makes it hard to determine what level of risk they’re taking on. This also makes it difficult for regulators to be certain that the insurers are liquid enough to pay out.
The regulation applicable to even centralised platforms can be hard to pin down, as so much infrastructure exists in the cloud and teams are spread all over the world. That’s hard to assess from a risk perspective.
What’s more, there’s little uniformity between different cryptocurrencies so it’s very difficult to address the market as a whole. Add to that the inevitable education gap and the negative narrative with cryptocurrency as the “medium of choice for facilitating ransomware payments” then it’s clear that the insurance and cryptocurrency industries have a lot to do to bridge the gap between them.
And I’m all in favour of that – but your assets are at risk NOW.
So, what can you do?
The answer is obvious, at least in theory – do whatever we can to reduce the risk so that insurance becomes cheap and easy to obtain (or even obsolete).
In practice, all the problems with cryptocurrency insurance stem from it being an innovative technology, so it makes sense to look to technology to solve whatever we can control.
And there’s a lot…
The two main sources of cryptocurrency loss boil down to hacking and human error.
We want everyone to know that there are things you can do to protect yourself and your customers from both of these things, today. If you’d like to read the full version, just download The Definitive Guide to Crypto Protection instead.
How to Protect Your Cryptocurrency Business from Theft
Hacks are getting more and more sophisticated, from Binance’s $40 million stolen thanks in part to transactions cleverly structured to pass internal security measures in 2019, to the $650 million lost to phished private keys experienced by Ronin Network in 2022.
Our cryptocurrency theft protection technology provides a real-time, inflow response on transactions before they are broadcast to the blockchain and could have stopped both of the hacks listed above (and many more).
What’s more, we have insured our technology at Lloyd’s of London, so if someone steals funds using an attack it’s designed to prevent we will compensate customers for any losses that our technology has failed to prevent as set out in our agreement.
How to Protect Your Cryptocurrency Business from Yourself (and Your Team!)
It’s often positioned as the network’s fault, but human error leading to loss is well-publicised. It’s estimated that 20% of all BTC is lost forever and, in the case of James Howells (who’s local to us, incidentally) there are even extravagant, venture-backed plans to try and retrieve some of it.
Disaster recovery technology securely backs-up private keys without ever exposing them to a third party (including us), so you still have options even if you lose a key. This would have kept the multiple billions of BTC that have been lost safe and retrievable.
If you’d like to find out more, just download The Definitive Guide to Crypto Protection today!
Benjamin J Church
Head of Digital, Coincover
Ben first got involved in cryptocurrency in mid-2017 and is excited for the potential it holds to improve the world. He looks after all things digital for Coincover, particularly the website. His core expertise is in search engine optimisation where he finds great satisfaction in systemising and scaling processes with Python. Ben is always looking to learn and try new things and, when not looking after his two children or practising guitar, he can usually be found reading or trying to get better at chess.