Declining volume of cryptocurrencies in the year 2018 has made it the worst loss in overall cryptocurrency industry. Resources recently reported that the Asian cryptocurrency exchanges and traders are striving to insure themselves against the unforeseen risk of hacks and thefts.
PwC fintech & crypto leader for Asia, Henri Arslanian notes that
“Most institutionally minded crypto firms want to buy proper insurance, and in many cases, getting adequate insurance coverage is a regulatory or legal requirement,”
Lack of Insurance Coverage Will Be Impediment to greater ‘Institutionalization’
Since the market is really unpredictable, such coverage is quite difficult to get at the present scenario. However, the reports indicate that there is a large number of institutional investors who are eager to invest in crypto, there are other many asset managers too who believe in the future of cryptocurrency – hence very keenly focusing on ensuring those crypto assets from the future hack or theft.
However, the absence of insurance coverage in this industry is somewhere stopping the greater innovation in terms of “institutionalizing crypto investments”. Hoi Tak Leung, a senior lawyer in Ashurst’s digital economy practice, notes about the requirement of institutional investors, he said that;
“Institutional investors who are interested in investing in crypto will have various requirements, including reliable custody and risk management arrangements,”
There are Custody Solutions But Nothing For Players in Top End of The Market
Besides ensuring the crypto assets, unclear regulations are another constraint investors are looking at. However, it has been seen that the insuring crypto assets would reduce the regulatory concern as such it would help crypto trading platform to have insured virtual assets which would be the future plan of Hong’s SFC. It has been reported that the Securities and Future Commission of Hong Kong is regulating crypto trading platforms thus demanding their assets must need insurance cover. Furthermore, an unnamed broker told Reuters that those platforms providing insurance covers are providing it within a limited constraints. He said that;
“We’ve not yet found an insurer who will offer coverage of a meaningful enough size to make it worthwhile,” he said.
There are dozens of inquiries claimed by insurers on this matter – however, they say ‘ they do offer cover’. Thomas Cain who is the regional director and commercial risk solutions at Aon’s Asian financial services and professional group said that there were two dozen inquiries received by Risk Advisor Aon this year, particularly from exchanges and crypto vaults that were seeking insurance.
Cain pointed out that;
“It is not difficult to insurance companies that hold large amounts of crypto assets, but given the newness of the asset class and the publicity some of the crypto breaches have received, applicants need to make an effort to distinguish themselves,”
Though there is a number of custody solutions developed by many crypto platforms, this is not something feasible for the top end player of the market. Tony Gravanis, managing director-investments at blockchain investment firm Kenetic Capital said that;
“Players at the top end of the market have also been able to get insurance,
Do you really think that the cyber-theft can reduce in crypto industry if the assets get insured? Let’s discuss.
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Sunil is a serial entrepreneur and has been working in blockchain and cryptocurrency space for 2 years now. Previously he co-founded Govt. of India supported startup InThinks and is currently Chief Editor at Coingape and CEO at SquadX, a fintech startup. He has published more than 100 articles on cryptocurrency and blockchain and has assisted a number of ICO’s in their success. He has co-designed blockchain development industrial training and has hosted many interviews in past. Follow him on Twitter at @sharmasunil8114 and reach out to him at sunil (at) coingape.com