The capitalization of cryptocurrencies has had a significant boom in recent years. Their growth has been so great that the different trading houses have not had enough to handle them. The IT security infrastructure behind these types of assets is vital to their operation, and this has been the target of multiple hacker attacks. As a consequence, a large part of the capital has been lost, giving way to a new type of market: cryptocurrency insurance.
Cryptocurrency insurance has already been embraced by high-profile companies in the field, such as Lloyd’s of London. In this way, it has managed to create a policy that will cover a total of up to 255 million dollars for those who have lost their crypto assets due to hacker attacks. Of course, for now, it will only be managed through the Coinbase platform, although a possible expansion to other exchange houses is not ruled out.
Similarly, other trading’s have joined the new insurance modality. Among them, are Gemini and Anchorage. Even so, the quota covered by this type of policy is still very low, compared to the total capitalization of cryptocurrencies, which in 2019 alone was 200 million dollars (and which has increased during this year). To all this, doubts arise as to whether it is really necessary to opt for any of these insurances. Let’s take a closer look at the situation.
Why choose cryptocurrency insurance?
As we mentioned, the rise in the use of the blockchain and its transactions in cryptocurrencies has generated alarm in the economic sector. The growing demand means that exchange houses are not secure enough to hold all the capital produced. Consequently, cybercriminal groups have shifted their attack focus to those platforms. The facts speak for themselves, and in 2019 Binance was the victim of a massive theft valued at 40 million dollars due to a “failure in its security protocol”.
In this same way, another event occurred, this time in 2016 (at the height of cryptocurrencies) where the target was the Bitfinex exchange house. Subsequently, those responsible were caught and brought to trial on theft charges estimated to be 120,000 BTC, which translates (during that year) to a total of $72 million.
Due to all this set of incidents, insurance companies have initiated measures to expand their market. From now on it will be possible to ensure any investment in cryptocurrency through specialized policies. In this way, not only is it sought to attract new customers but it is also intended to regain the trust of those who had discarded crypto-assets as a good form of reserve.
Poor regulation of crypto-assets has stopped new insurers from joining
The process for cooperation between exchange houses and insurers to occur in 2018. Even so, it was not until October 2019 that the efforts bore fruit, with Binance adding the coverage of its users’ funds through the Federal Deposit Insurance Corporation (FDIC). In this way, the community felt some relief regarding the security of its assets, however, many times it is not enough.
The main reason why there is still some degree of uncertainty in the community is because of certain loopholes that can give rise to money laundering. The lack of regulatory clarity is, in part, what distances the rest of the insurers from joining the cause; And this is how Yusuf Hussain, head of the Genesis exchange house, has expressed it:
“Having a better quality of regulation, much more careful, will be the cornerstone for a greater availability of insurance in the field of cryptocurrencies.” If that happens, it will be the beginning of a sustainable and healthy path in the market, giving incentives to greater innovation in the long term”.
Regarding all of the above, the lack of emphasis on regulation in the field may still persist. Therefore, to enjoy insurance, you should only opt for the group of exchange houses indicated (which for now is very small). On the other hand, those who wish to buy Bitcoin and other currencies for the first time should take into account the recommended security measures when making a transaction.
Some of the measures that cybersecurity experts recommend include renewing passwords from time to time, avoiding the accumulation of capital in a single exchange, and adding 2-step verification to each of the accounts with funds. Similarly, it is likely that new measures by companies will be taken to stop the constant hacker attacks.
Cryptocurrencyinsurance.io offers the best insurance policy cover for all your cryptocurrencies and digital assets. You can now ensure your bitcoin, Ethereum, other cryptocurrencies, and digital assets.