In time, cryptocurrency markets will begin to mature, and these mean that other industries would be attracted to this. Knowing that Stablecoin USDT Not Fully Backed by Cash Reserves, still one of the key industries will surely come from the insurance field. In fact, as mentioned in a report by Bloomberg, crypto insurance will become a big opportunity in this field. In addition, a spokesman from one of the biggest insurance companies, Allianz, said that they are exploring coverage options and products since crypto is becoming relevant these days, and it’s even influencing the real economy.
Reasons Why Cryptocurrency Needs Insurance
Right now, most of the cryptocurrency-related businesses are just starting, most of them startups and exchanges, so these make them take less revenues as they’re still not big enough. In fact, you can search it on publicly available info, and see that even the largest cryptocurrency exchange coin base in North America only holds 2% of coins insured with Lloyd’s London. Coins that are placed in storage are directly connected to the internet, and the rest are not, so there are not many updates on these in terms of insurance status.
This is where insurance for cyptocurrencies comes in. When you think about the instability of the cryptocurrency ecosystem, you surely need insurance for this. Because cryptocurrency’s fame skyrocketed, this results in numerous thefts and fraudulent activities on online exchanges and wallets.
As these hacks are accumulating, the cryptocurrency ecosystem becomes vulnerable. What makes this even more frustrating is that the finance ecosystem is not taking this seriously.
While these cases are a challenge for insurers, this doesn’t mean that they are not entering this field and offering their services. Currently, one challenge insurers are facing is that insurance needs historical data. However, cyptocurrencies don’t have this. Because of this, there is a lack of oversight and regulatory uncertainties in exchanges which eventually complicate processes and matters for those insurers involved.
This led to insurers creating a list of risk factors for cryptocurrencies. They eventually established a recognized standard for hot online and hot offline storage. This helps in risk management. What’s more is that they were able to enhance security measures for cold storage, server-side security, multi-signature wallets, and the like.
Profit in Insurance
These issues in the cryptocurrency industry, where insurance can greatly, help allow insurers to profit from this. It’s a win-win situation for both parties as insurers make sure to create insurance services that are tailored to the client’s needs, making them unique.
This is why insurance is flourishing in this industry. More and more starting companies are opting to include insurance in their cryptocurrency businesses, platforms, and wallets. Most of the time, they tend to get insurance that covers theft cases.
If you’re one of the many cryptocurrency startups, it’s always a good idea to get insured. Eventually, this would possibly become a necessity even. Hence, while everything is still new, go with what’s suggested by the majority as it’s always good to be safe than sorry against those inevitable thefts.