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The cryptocurrency market seems to be attracting all manner of players. This is an industry that has proved to be unique and one of the sectors taking interest in cryptocurrency is insurance. Recent studies show that crypto-insurance is bound to become one of the biggest industries in the near future. A number of insurance companies like Allianz are already exploring coverage products that would be ideal for cryptocurrencies. The reality has hit the ground that cryptocurrencies are a part of the economy and need to be considered by other industries.
One of the key reasons why insurance would sell big in the crypto market is due to the instability of the coins. People choose insurance covers to safeguard their investments and prevent losses. As such, since the prices of cryptocurrencies are unstable, an insurance cover would be a perfect opportunity. Besides the price fluctuations, there are possible cyber crimes against the crypto wallets which need to be insured as well. You are aware that the cryptocurrency world is not regulated and as such, there is a risk. Insurance policies are meant to mitigate losses and potential risks.
The Need for Cryptocurrency Insurance
Cryptocurrency is still a new business and there are so many new challenges that are still being solved. However, since most exchanges are startups, the industry may not attract enough revenue for the insurance sector. For instance, Coinbase, which is the largest crypto exchange in America, has only 2% of its coins insured. The coins are in hot wallets, which means that they are stored in the cloud or other platforms that are connected to the internet. The others are stored in devices that are not connected to the internet and as such, they may not need insurance.
There are many traders who invest huge amounts of cryptocurrencies on platforms like Big Money Rush. Considering the instability of the coins, it may be a good decision to have insurance for the coins. In the last few weeks, the price of Bitcoin skyrocketed and then took a sharp dip. No one would want to go through such emotions with their investments. This is why insurance for the crypto ecosystem is essential and urgent. The wallets and exchanges are also exposed to a couple of threats and need to be safeguarded as well.
In 2018, Coincheck, one of the most popular cryptocurrency exchanges in Japan was hacked and coins worth $500 were stolen. This means that the systems are as vulnerable to hacks as any other systems and as such, they need to be insured. It is evident that there are tons of perils that can take place in the cryptocurrency world. Cryptocurrencies pose a serious risk and they are still a challenge for most insurers. The complexity of the cryptocurrency world makes it hard to come up with the right insurance policies.
Lack of regulatory controls and measures and the instability of the value of cryptocurrencies is a serious challenge for insurers. Coming up with premiums has been a headache as this is not a definite industry like centralized finance. It is true that this is a lucrative industry and insurance companies are keeping an eye on cryptocurrencies. Most insurers are waiting for some level of regulation to come into existence to give them the courage to insure cryptocurrencies with clear guidelines.
Bottom Line
While it is not out there yet, there are a number of insurers who have come up with ways of determining premiums for cryptocurrency insurance. AIG claims that the virtual currency industry is similar to the digital armored car service. There are serious risk levels in the crypto market and this seems to be an appealing element for insurance companies.
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