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How to Insure Crypto Assets With Crypto Insurance

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Cryptocurrency may have started out on the periphery of financial markets, but it’s gotten progressively harder to ignore.  Recently, the cryptocurrency market cap reached $2.05 trillion.  That’s equivalent to the gross domestic product of Italy!  There were at least 8,000 cryptocurrencies in existence as of last month, and 79% of the global daily trade value comes from the top 10.  Crypto changes hands every day to the tune of $91.5 billion.

One problem: crypto exchanges don’t always happen willingly.  While crypto is designed to be secure, it is still relatively easy to lose or steal.  In 2022 so far, more than 1,500 Bitcoins have been lost every day.  20% of Bitcoin is stranded because of lost wallets; people can’t find their private keys.  Another major issue is file corruption; roughly 1 in every 1,500 files will get corrupted.  That number seems small until one considers how many files exist in the world total.

Then there’s the most worrying way crypto gets lost: to theft.  In 2020, illicit acquisition of crypto stood at $7.8 billion.  In 2021, that number nearly doubled to $14 billion.  As more people decide to own cryptocurrency and NFTs, the prevalence of theft and scams will only get worse.  Common methods of theft include phishing, ransomware, hacking, and Ponzi schemes.  The last item is the worst of all, having stolen over $2 billion from unsuspecting victims. 

Even if one is able to avoid all the pitfalls discussed above, the fact remains that crypto is a highly volatile market.  Only half of America believes that crypto is a stable enough asset to consider investing in.  Some people consider this instability an inherent characteristic of the market, but others want to invent ways to cover themselves.  This is where the possibility of crypto insurance enters the picture. 

The cryptocurrency insurance industry may just be getting started, but it’s already worth $3 billion.  The insurance currently on the market exists for businesses, not personal wallets.  Flexible limits can be put in place to ensure portions of the cryptocurrency investment remain protected no matter the whims of the market.  Insurance also protects the investment against theft and scams.  Actions to which cryptocurrency applies include exchanges, mining, payment processing, infrastructure, and more.

If a business is interested in insuring their cryptocurrency portfolio, what should they do?  They should approach the process as they would for any other type of insurance.  First, locate providers and obtain quotes.  Every situation is different, so quotes will vary as well.  Next step is to compare insurance premiums. Finally, choose the potential disasters you want umbrellas for.  Does your business only need fraud insurance, or would custody insurance also be beneficial?  These are questions each individual business must answer for themselves.

Is crypto insurance worth the cost?  Maybe.  The good news is that as digital assets become more widely available, so too are ways to protect oneself from the volatility of the market.  NFTs benefit from the same protections as well.

Allan Strauss has a proven track record of editing and formatting content for newspapers, magazines or any other publishing endeavor. His experience includes everything from layout design to public speaking on stages around the world.

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