Bitcoin Global News (BGN)
April 10, 2019 -- ADVFN Crypto NewsWire -- Up to $255 million
is the total insurance covered for Coinbase customer hot wallet
balance totals. This is huge in comparison to most exchanges where
there is no insurance coverage whatsoever. Coinbase notes that the
total value of customer hot wallets is actually less than 2% of
their total custody services, which is roughly $25
billion.
Is Lloyds The Crypto
Choice?
The policy was created with Lloyd’s
registered broker Aon through a pooled global group of US and UK
insurance companies. Lloyd’s gathers a range of specialist
insurance markets dealing with everything from crime and cyber
attacks to natural disasters, and seems to be becoming the go to
insurance group relating to potential losses of crypto
assets.
Lloyd’s is steadily becoming more
visible, for a certain class of crypto customer at least. Last
month security specialists BitGo trumpeted $100 million of cover
for crypto held in cold storage and went as far as naming the lead
Lloyd’s underwriter of the policy.
“We’re glad to see that Coinbase is
following our lead in bringing more transparency to the discussion
of insurance for digital assets. Insurance is complex and
transparency is essential for building trust.” - Clarissa Horowitz,
VP marketing, BitGo
Value In Transit or Asset
In Transit?
It has already been an ongoing
battle for most countries around the world to develop working
regulations for cryptocurrency, blockchain based assets and
tokenized assets. They have been defined as commodities, currency,
property, securities and investments. This is now raising issues
with insurance coverage. When a company claims that their customers
cryptocurrency is covered by insurance, what exactly do they
mean?
Any consumer loss scenario for any
cryptocurrency company is most likely going to be due to hot wallet
hacking. In the UK this would be considered a crime insurance
market event, whereas a theft from cold storage would be covered in
the specie marketplace. The main difference being whether or not
the asset is in transit.
In specie is a Latin phrase meaning
"in its actual form.” In financial terms, this is represented when
an asset is distributed as-is, rather than being sold and
distributed as cash. This applies essentially only to cold storage
cryptocurrency. It would not cover a loss of funds that occurred
due to an on-blockchain failure, such as a vulnerable smart
contract multi-signature implementation.
“Companies should focus on
insurance for value in flight. This means that exchanges and
wallets should have sufficient crime coverage to fully cover their
hot wallets (including enough buffer to handle asset price
spikes).” - Philip Martin Coinbase VP of security
Crime policies cover things like
theft of cash in ATMs and armored cars. In cryptocurrency, this be
things like hacking, insider theft, and fraudulent transfers.
Included in this are fiat currency and hot wallet cover in addition
to the physical damage or theft of private key data in cold
storage.
“We need a world where the ultimate
owners of cryptocurrency are able to directly insure their assets
stored with trustworthy, well-reviewed, transparent service
providers,”- Philip Martin
By: BGN Editorial Staff