Insurance covers nearly every branch of the economy, from finance to manufacturing and even personal property. As the cryptocurrency market continues to heat up, the insurance industry appears to be setting its sights on it. It is true that in cryptocurrency trading, the market fluctuates and hackers often "patronize" and become the weakness of the transaction, bringing many threats. The involvement of the insurance industry seems to be able to hold up an umbrella for cryptocurrency transactions, but is this really the case?
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Why do you need insurance?
As the value of cryptocurrencies has risen, their transactions have been frequently hacked and interfered with by third parties.
first half of this year, The number of related crimes has exceeded the total amount of crimes in 2017. About $1.7 billion worth of cryptocurrency was stolen, and it has reached 62% of the number stolen since 2011. At the beginning of the year, the Japanese cryptocurrency exchange Coincheck was hacked and lost about 530 million U.S. dollars; recently, the Bithumb exchange was attacked by DDoS, and hackers stole nearly 32 million U.S. dollars from the exchange’s hot wallet. Smaller exchanges have also begun to be "flopped",Korea Coinrail Exchange$40 million worth of cryptocurrency has been stolen. also,Centralized exchanges still dominate the mainstream, are more vulnerable to hacking.
In addition, personal cryptocurrency assets have also been targeted. There has been a surge in the number of cryptocurrency exchanges around the world, but the good and the bad are mixed. The bankruptcy of the exchange, running away, etc. also caused losses to individual users. Even hardware wallets cannot fully guarantee the safety of users' property. In February of this year,Cryptocurrency hard wallet "Ledger" exposed to vulnerabilities, cybercriminals can use this vulnerability to display fraudulent wallet addresses to Ledger users, and eventually transfer the cryptocurrency to the attacker's wallet.
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Insurance industry steps in, but cautiously
The high-risk cryptocurrency market is undoubtedly a huge potential market for the insurance industry,Several global insurance giants have also started offering cryptocurrency insurancealsoalso, XL Catlin, Chubb, Mitsui Sumitomo and other insurance companies began to provide cryptocurrency anti-theft services.
For exampleFor example, the Great American Insurance Group (Great American Insurance Group) provides employee theft protection insurance to companies that accept bitcoin payments, but does not cover losses caused by external risks, such as hacking; due to the high risk of hot storage being hacked, some insurance companies It also only provides insurance for cryptocurrencies held in “cold storage” offline.
On the other hand, the supervision of the encryption industry is not perfect, and the existence rate of illegal enterprises is quite high. Insurers need to develop a framework for reviewing the legitimacy of applicant companies, which is often more onerous than traditional industry reviews and often takes months to complete. also,To ensure its clients adhere to the highest industry standards in the industrysecondary title
Behind the insurance policy, it is still difficult for users to "sit back and relax"
Before being hacked,Bithumb is insured by Hyundai Marine & Fire Insurance Company and Heungkuk Fire & Marine Insurance Company. The hack caused a loss of about 31 million US dollars, but the insurance coverage only provided 5.39 million US dollars in insurance compensation, which means that Bithumb must use its own funds to fill the payment loopholes in order to recover users' losses. This may be a drop in the bucket for Bithumb, which has huge profits ($424 million in 2017).
For small-scale cryptocurrency exchanges, in the face of large-scale hacking attacks, insurance or earlier profits may not be able to make up for platform losses. After Coincheck was hacked, the loss was as high as 545 million US dollars, which was 17 times that of Bithumb before.But Coincheck's profit from April last year to January this year was only about $490 million.
The availability of cryptocurrency insurance will be a “catch-22” for exchanges. On the one hand, many investors prefer exchanges that have been insured; on the other hand, due to the difficulty in calculating risks, the insurance coverage provided by insurance companies makes it difficult for exchanges to "feel".
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The Future of Cryptocurrency Insurance
Because of the unpredictability of hacking, insurance companies are unwilling to take excessive risks for profit reasons. Although the insurance industry has realized the market potential of the cryptocurrency field, it is still unknown whether insurance will become a must for entry into the cryptocurrency market in the future.
However, the insurance industry's foray into the cryptocurrency space could help this young industry mature while creating new business for itself. In the future, can cryptocurrency insurance business be customized? Are Crypto Exchanges Still Financially Responsible? Whether these problems can be resolved is also worth looking forward to.
