The evolving cryptocurrency industry is facing some challenges in Asia. Both India and China have adopted a hostile attitude towards the digital coins; however, that doesn’t undermine Asia’s importance for the wider adoption of cryptocurrencies.
Thefts and Frauds
Along with the regulatory framework, the issue of thefts and frauds has been the most pressing one with most of the traders finding it difficult to protect themselves against the heists. In fact, traders claim that it is a threat of hacks that have kept the large fund manager from investing in the crypto market. The crypto industry has already suffered a major blow to its reputation owing to a large number of high-scale thefts and experts who believe that approval from the insurance company would help the industry to reinstate the confidence of buyers. And thereby, attract large fund managers to invest in the crypto industry.
Commenting on the issue, Henri Arlanian, crypto leader for Asia, said that most of the cryptocurrencies firms are inclined to get the insurance coverage as the law mandates it in many cases. However, getting the insurance companies on board is quite a difficult task, and despite all the efforts, the crypto organizations are not able to get the insurance coverage for their assets. This even as findings of one survey revealed that most of the asset managers were keen to invest in the crypto market and as large as 72% believe that cryptocurrency had a considerable future scope. Another observation has come from Mohamed El-Erian, Chief Economic Advisor of Allianz, who recently said that as more and more players start to invest in the crypto space, the industry will become widely accepted.
Sentiments on the Ground
Despite all these positive sentiments, little has changed on the ground where the people are still skeptical about investing in the crypto market. Some of the key reasons behind this negativity include uncertain regulatory frameworks, insufficient infrastructure, lack of trust in the system to provide a safe and secure trading experience which has been exaggerated by thefts amounting to billions of dollars in the last year, etc. The absence of investors’ enthusiasm is also visible regarding current market capitalization of crypto industry which is rated at $120 billion. In January last year, the Crypto market size was estimated to be around $800 billion.
Needs of Institutional Investors
Emphasizing on the need of institutional investors, Hoi Tak Leung, a senior lawyer in the Ashurst digital economy, explained that the large-account investors usually consider the number of requirements while investing with risk management and reliable custody being the most important ones. He said that lack of insurance coverage, which is of great necessity in the case of a very volatile crypto industry, is a significant deterrent for the institutional investors to invest in the market.
Along with the insurance, the uncertainty regarding the crypto regulatory framework is another impediment for the institutional investors. Most of the regulators have failed to come out with a clear-cut mechanism or framework describing how the cryptocurrencies should be traded in the market and what are the legal ramifications arising out of any kind of a dispute regarding the digital currency. However, there are some exceptions as the Securities Commission of Hong Kong has recently announced a comprehensive set of guidelines and procedure for the crypto exchanges and clearly indicated that most of the digital coins trading in the exchanges required mandatory insurance protection.
Online Security Threats
In the case of crypto trading, the security of the online account is also of significant importance. Securing the Crypto assets required a 64 character alphanumeric key, and generally, the assets are stored online in Hot Wallets. The online storage of assets makes them easy to trade compared to offline, but then online wallets are more susceptible to hacking. According to estimates, online assets worth more than $1 billion lost to thefts in the last year, prompting many players to enter into the segment of providing cryptocurrency custody services.
Solution in Sight
The crypto industry is working towards finding a solution for all these issues. Thomas Cain, Regional Director of the Aon Asian financial services and professions group, said that the risk involved in managing and advising companies had received inquiries from crypto exchanges seeking the insurance of their assets. He said that there is no particular difficulty in insuring a company having a large number of crypto assets, but in the wake of the newness of crypto industry and infamous publicity some of the recent crypto breaches have received, the applicants have to put in some extra efforts to distinguish themselves. Besides this, the solution to the online assets breach is also within reach as many custody solution providers have invented a set of tools specifically designed for institutional investors.
To sum up, it will require some time before crypto players get their assets insured straightforwardly without any difficulty though for now, the path for wider crypto adoption goes through developing a more robust infrastructure for gaining customer confidence. This calls for increased collaboration between the crypto exchanges, solution providers, and regulators for providing safe and secure trading experience to the investors.