In 2018, over USD 1 billion was robbed from crypto assets by hackers across the globe. Security firm CipherTrace has said that amount hacked last year was 3.5 times more than that of 2017. Several thefts were reported across currencies and exchanges. This is probably why many experts have voiced that insurance will play a big role if cryptocurrency has to flourish.
Cryptocurrency exchanges and traders, especially in developing markets like Asia have been facing threats from hackers, and this has severely hindered their growth. Big players and large fund managers have been away from investing in crypto assets mainly because cryptocurrencies, unlike other assets, are mostly uninsured or at best, underinsured. Crypto companies have been struggling to get their assets insured against hacks or thefts, due to the mediocre understanding of potential risks in crypto trade and lack of crypto-insurance firms in the market.
More than 1500 cryptocurrency exchanges exist in the world, and most of them are underinsured. This is why potential investors are maintaining a distance, in spite of having keen interests. However, the situation could change in the future, and for good. With more and more financial companies entering the game of blockchain technology, the insurance industry has started reacting to this, though very mildly. BlockRe, an insurance company solely focused on crypto assets, is first of a kind and is leading the way of crypto insurance.
As the market progresses, and with other insurances companies agreeing to offer services to cryptocurrencies, prospective investors can be turned in to clients by crypto firms. This cycle will probably bring crypto assets on par with other financial services, but insurance is necessary. Having insurance gives investors a sense of security to invest more, which helps crypto companies to allocate money for developing sophisticated security systems to prevent hacking and other forms of digital thefts.
Until now, only a few big insurance companies have been offering legit and sufficient insurances, and that too, only to companies who have been in the game for a long period. Hence, the market, which aggregates to more than $500 million, has been underserved at large. This trend is bound to change shortly, as the crypto assets market is maturing as a whole.
Awareness related to risks and security of digital currencies is increasing and spreading fairly quickly. Several recent incidents of hacking are busting traditional belief that FIDC and SIPC type of protection extends to unregulated digital assets. Hence, Individual holders and crypto trading firms are now becoming concerned about security which has led to a rise in demand for digital security systems and insurance. The insurance sector has now started seeing the cryptocurrency market as a great prospect. However, there is a long way to go regarding market coverage.
Unless the digital asset markets start getting more secure and insured, investments will not move. Nonetheless, cryptocurrency is growing and maturing with each passing day, regarding security and awareness, which will invite insurers and investors shortly.