The emerging concept of ‘crypto insurance’

Context

Cryptocurrency investors are increasingly looking at ways to protect their assets from being stolen. One particular way to get your money back even if an unfortunate incident takes place is through crypto insurance.

About Crypto insurance

• Crypto insurance is a policy designed to protect investors against any losses associated with crypto scams and cyberattacks. 
• Most exchanges like Coinbase, Binance, etc., already have some insurance to protect the digital assets they hold for their customers.
• In a digital world, there are possibilities of cybersecurity breaches, but with adequate precautions such as crypto insurance, one can protect themselves from such incidents. 
• They provide owners with a certain degree of insurance to protect digital assets from breaches and theft.
  

How this insurance is different?

• Cryptocurrency isn’t a legal tender. So, crypto insurance is different from that you can avail for your stocks, bonds or any other bank insurance. 
• In short, it is not protected the same way other deposits might be.
• Crypto insurances can only cover hacks or crypto thefts. It is designed to cover institutional losses. But can’t insure you if you fall trapped in a Ponzi scheme which promises high returns with no risks. 
• The crypto insurance policy doesn’t cover direct hardware loss and damage and cryptocurrency transfer to a third party. Additionally, it won’t be able to protect against the disruption of the blockchain underlying the asset.

Need for crypto insurance

• Cybercriminals are now taking advantage of the ongoing craze around cryptocurrencies to trick potential victims and steal their digital money. 
• In fact, a report by Chainalysis revealed that hackers have exploited vulnerabilities within crypto platforms, mooching off over $3.2 billion worth of cryptocurrency from victims in 2021.
• The need for crypto insurance is due to the rising hacks that have created a sense of fear among investors. 
• Over 46,000 people reported losing over $1 billion in cryptocurrency scams and hack since the start of 2021, according to the Federal Trade Commission (FTC) report released in June.

Buying a crypto insurance

• The company has an individual protection plan that ranges from $10 to $750, covering crypto assets against hacking, phishing, malware, device theft, trojan software and brute force attacks.
• Coincover has insured its theft prevention technology. This means that if someone steals your funds using an attack our tech is designed to prevent, the company could compensate you.
• Most crypto insurance providers that exist today do not directly target consumers. These insurances are bought by crypto companies and exchanges instead. The coverage ranges from any cybercrime or theft, and custodial wallet insurance.