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Highlights
- The concept of ‘crypto insurance’ is still in its nascent stage.
- Currently, crypto protection is limited and are provided by the likes of Vesto, BitGo and Civic.
- Among crypto exchanges, Coinbase, BlockFi, Bitstamp, offer insurance against crime.
Investing in any stock, commodity, securities or cryptos can be a risky affair. While the traditional investors who invest in stocks market or the equity market are protected against any time of scam, or market malpractice through various regulatory authorities such as the FCA or SEC etc., cryptocurrency investors, on the other hand, are deprived of this privilege.
With cryptocurrency largely being an unregulated market, investors are at a risk of losing money due to volatility or scams, or hacking. An absence of a regulatory authority means that in case an investor loses his money, the crypto companies as of now are not liable to cover these loses. This has often left investors urging for the need for crypto regulations or crypto insurance to protect themselves against the losses.
In fact, according to a Chainalysis report titled 2022 Crypto Crime Report, the crypto crimes in 2021 accounted for US$14 billion. Digital wallet scams increased by 80% from a year earlier. The illicit activities included scams on darknet markets and through various ransomware.
Also read: Is Bitcoin losing market dominance good news for investors?
Growing need for crypto insurance
Given the unpredictability of the market, there is a growing need for cryptocurrency insurance by the market participants. The concept of crypto insurance is still in its nascent stage and even the limited one that is present doesn’t cover all the aspects of insurance. Most of big insurance players are not keen on crypto insurance due to its relative immaturity of the cryptocurrency market.
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Currently crypto insurances are not provided by the government agencies or regulatory authorities. The limited form of insurance that is there is provided by the insurance-backed cryptocurrency protection platform, Coincover, which offers it for wallets such as Vesto, Civic.
Among the exchanges, the likes of Coinbase, BlockFi and Bitstamp do offer crypto protection against crime, but they cannot be considered as a part of insurance. Meanwhile, there have been discussions taking rounds by an independent agency of the US federal government, the Federal Deposit Insurance Corporation on crypto insurance, but it at best can be described in its early stages.
Also read: Top 10 cryptocurrencies beyond Bitcoin to watch in 2022
Can regulations bring insurance?
Crypto regulations could give the insurance industry a big lift and it could bring in bigger players into the mix. Whenever cryptos get regularized, it would bring it into the more traditional form of investment commodities, and this could mean bigger banks and players offering reliable schemes to protect your investments.
The regulations could well be the defining point for crypto insurance sector as well. Investors need to be protected against unwarranted losses and protecting their investments or protecting them in case of a fraud could go a long way in strengthening the sector.
Conclusion
With the rise of institutional investments in cryptocurrencies, we could see the debut of crypto insurance soon. There is tremendous potential of this, which could lead to more adoption by investors.
Given the uncertain nature of cryptocurrencies, this could well be a novel idea that could benefit the investors and thereby could be in a better position to protect themselves against frauds or scams.
