Is your cryptocurrency insured?

Investors who own conventional securities, such as stocks or bonds, can rely on a level of protective regulation and insurance backing, either through the US government or private policies. However, investors in cryptocurrencies do not have the same protections.

While there has been a demand for crypto insurance to cover everything from deposits to theft, the main concern is underwriting risks. Major insurance companies feel they cannot accurately assess risk factors due to the lack of consistent rules and regulations within the crypto insurance industry. Although the newer insurers are diving head first, others are simply dipping their toes to test the temperature.

Given this level of unpredictability in a developing industry, how do you know if your cryptocurrency is protected? And if not, can you assure it? Here you will find everything you need to know about the new world of cryptocurrency insurance.

Is my cryptocurrency insured by the US government?

No. The federal government offers insurance for cash and conventional securities deposits, such as stocks and bonds, but not crypto assets, at least not yet.

An independent agency of the federal government, the Federal Deposit Insurance Corporation, generally insures up to $ 250,000 per person, per bank. Covers all checking accounts, savings accounts, money market deposit accounts, and certificates of deposit. It does not currently cover cryptocurrencies.

However, the FDIC is considering it. In an initiative called Sprint Crypto Asset Policy, the FDIC partnered with the Federal Reserve and the Comptroller's Office to study cryptocurrency and coordinate "policies on how and under what circumstances banks can engage in activities involving crypto assets." according to FDIC President Jelena McWilliams. However, we do not know how long this process will take or if the FDIC will decide to jump into space.

Insurance for deposits in brokerage accounts for the purpose of purchasing securities is currently included in the Securities Investor Protection Corporation. Representatives from both the SIPC and the FDIC confirmed that neither currently secures crypto assets.

That means there is no federal protection for your cryptocurrency. As far as the government is concerned, you are alone.

Is there a private insurance for cryptocurrencies?

Yes, but it is still a nascent industry and protection is extremely limited. "Most crypto assets are not currently covered by insurance, and that is due to the relative immaturity of the crypto market," said Brian O'Connell, insurance analyst at Insurance quotes.

The types of private crypto insurance that exist today are not currently aimed at consumers, but are purchased primarily through crypto exchanges and wallets. Coverage includes crime and theft, custody insurance coverage and business insurance, though more types are in development, according to O'Connell. The future of crypto insurance could include decentralized finance insurance ("DeFi"), which provides coverage for loss of funds due to loss of private crypto keys or the shutdown of the service provider, O'Connell explained.

Since insurance exists primarily at the exchange and wallet level, whether you are covered as a crypto buyer depends on the crypto services you use.

Do exchanges like Coinbase and wallets like Vesto secure your cryptocurrency?

Yes, but coverage is limited.

Coincover, an insurance-backed cryptocurrency protection platform, provides crypto protection for wallets - included I dress up, BitGo Y Civic - through policies underwritten by Lloyd's of London Y Aon. This means that you will be protected (by virtue of the use of those wallets) from all theft and loss of cryptocurrency as a result of things like brute force attacks, cyberattacks, device theft, and hacking.

"Coincover offers protection from as little as $ 1,000 for consumers to an additional $ 10 million for corporate wallets," said Sharon Henley, Coincover's chief product officer.

It can also be secured through the encryption exchange you use. Coinbase, one of the largest crypto exchanges based in the US, has $ 255 million crime insurance politics, according to O'Connell.

That coverage kicks in if Coinbase suffers a platform-wide cybersecurity breach. But if a hacker accesses your personal account and steals your crypto, Coinbase insurance won't cover it. And in the event of a platform-wide cyberattack, you may not yet recover all of your assets. The Coinbase website explains that if "total losses ... exceed insurance recoveries ... your funds may still be lost."

Equally, BlockFi Y Bitstamp, two other crypto exchanges, have crime insurance. BlockFi provides insurance against theft through its primary custodial wallet, Gemini.

Bitstamp not only has crime insurance with a total coverage of $ 300 million, its assets are also insured through the wallets it uses: BitGo and Copper. Bitstamp stores 95% of its digital assets offline in cold storage, which is not connected to the internet and is more secure against hackers.

Binance.US and FTX, other popular exchanges, did not respond for comment.

Can you buy encryption insurance?

As far as we know, you still can't buy an encryption policy for yourself. We contacted national insurers such as Allstate and State Farm, who confirmed that they do not offer encryption insurance at this time.

Also, the big players entering the crypto insurance industry don't seem to sell individual policies to consumers either. For example, Coincover confirmed that it does not have an offer for consumers yet (although they are working on it), nor does Great American Insurance Group, the first insurance company to provide encryption insurance. According to O'Connell, the company Etherisc is developing crypto wallet insurance for other insurers to cover crypto assets.

If you sell crypto insurance directly to consumers or know of an operator that does, please contact us.

The future of the industry

The 21st century is witnessing the rise of digital assets and the crypto insurance industry is starting to emerge along with it. Although it has great potential, it is not yet fully mature.

"Right now, cryptocurrencies are a major risk for insurers, primarily due to their unregulated status," O'Connell said. "It's still a Wild West atmosphere and that's exactly the hedging environment that the insurance industry doesn't like."

Given the limited coverage that exists today, you may want to brush up on encryption security measures Y actions to take if your crypto is stolen.