Bitcoin Global News (BGN)
November 21, 2018 -- ADVFN Crypto NewsWire -- When we consider
the case for widespread adoption of Cryptocurrencies, the
roadblocks that come to mind are usually related to partnerships
and education of the general populace. Both areas are valid
concerns, but it seems as if neither is the biggest factor that is
holding Crypto back.
For a possible answer to that,
consider insurance.
Yes, you heard that right. Even
though most Cryptocurrencies are inherently decentralized, a strong
case can still be made for them being insured. If this is not
accurately done, then, as Coindesk suggested today, many
institutional clients will continue to hold out on investing in the
space. The reason why comes down to the same reason that many of us
still trust banks with the bulk of our money.
If something goes wrong and the
bank ends up losing a lot of customer funds, those funds are not
truly lost. As we know, they are effectively insured by the
government.
While in the case of
Cryptocurrencies, government insurance would be an oxymoron,
certain companies are working to provide a similar, yet private
scheme. Aon Risk Solutions, which is one of these companies,
recently helped to clarify some of the difficulties being faced in
this niche. Central to this discussion was the point that there
just is not enough insurance to go around.
Jacqueline Quintal, one of Aon’s
practice leaders, specifically stated that capacity is behind
demand. So, why is this the case? What can the current state of the
market tell us about the reason behind Crypto investments not being
truly backed on a one-to-one basis?
If we continue to use Aon as the
effective case study for this analysis, then the answer comes down
to the confidence of the traditional finance industry in the
viability of Cryptocurrencies. To understand this, it is first
important to clarify that Aon is not a Blockchain firm.
They are actually a publicly
traded, leading provider of risk management insurance to various
kinds of financial companies. Therefore, in the same way that
institutional investors are balking at investing into Crypto due to
market volatility, Aon and others like them could be doing the
same. If theoretically, many leading financial services companies
are not confident that Crypto is a trustworthy investment, then why
should traditional insurance providers be any different?
In Coindesk’s article today on the
subject, their estimate of the current coverage given by insurance
providers to businesses with Crypto holdings is quite telling.
Precisely, that number reportedly sits at only $6 billion globally.
Even if you look at the average Crypto market cap this week, it is
still around $140 billion. Because of this, it becomes quite easy
to see that we are nowhere close to a reliable insurance solution
that would draw in large clients, en-masse.
In the end, one logical answer to
this effective wall that sits in front of our chances for
widespread adoption is insurance via Stablecoins. If investor
holdings are insured with Crypto coins that keep a consistent
value, then such a solution would work just as well as those that
are fiat based.
By: BGN Editorial Staff