Crypto Insurance Is Hard to Come By, but Coinbase Looks to Give Investors a Shot to Avoid Risks
It is no secret that the financial market now sees cryptocurrencies as something interesting. However, one of the main issues that they have with cryptos is that they are hard to protect against theft and hacking.
Getting a crypto insurance can be very hard and expensive and Coindesk has recently talked about how it is difficult for everyone, maybe except Coinbase, to find a proper solution.
Without insurance, it is simply impossible to make a break with these companies as they are simply not willing to waste their money in any way and they fear that their investment can be stolen because cryptos are not protected and you cannot do chargebacks.
The problem, the article affirms, is that the insurance industry is a very “opaque market” and that it does not want to insure too much money. As the transactions of the exchanges are very large, it simply does not work well at all. Unlike stocks and bonds, cryptos can be gone if lose your keys and, therefore, insurance is a must.
Also, the article states, it is clear that despite the 2018 bear market, criminals are still very eager to use cryptos in many cases, so this can also be considered a bad idea for institutions.
How Coinbase Can Get Insurance
The main argument of the original article is that Coinbase has a huge edge. The company has been working with cryptos since 2013 and it is very well developed. Also, it is already working to get a good insurance protection. If someone can be able to get insurance, it will surely be a company like Coinbase (or maybe Binance).
The article also explains how insurance works today and affirms that there are two types of insurance protection, from crime and for the specie markets. As Coinbase keeps most of its money in cold storage, it will be protected by the market that is more popular, specie market. The other one is not very popular and has a protection that is far less used.
It is said that there are specie consortiums that can offer a protection to cover up to $660 million USD in cold storage, but this is not enough for most companies and it is even unlikely that a company could get that amount. Hot storage capacity would not even approach $200 million USD, for instance, which is simply not enough.
Insurance for cryptos is expensive and sometimes not that useful but certainly need to have some insurance. However, a company stands out among the ones who offer insurance, Coindesk’s article claims.
It is also important to notice that not many of these companies, if any, is actually ready for offer the protection that can be tailored for the crypto market. As the companies are not used to it, they will also feel more inclined to not do it.
This company is Lloyd, from London. The company is centuries-old and it is one of the biggest ones in the market today. Collectively, the company’s syndicates wrote $43.3 billion USD of gross premiums covering a wide range of property and liability.
So, Lloyd and Coinbase? This is what the article seems to be pointing out to. If the companies are able to work out a deal between them, the largest exchange in the United States will be able to really enter in the institutional market for good and this can really be a boost for the crypto market.
Will it happen? That is harder to say as we can only look at some information and try to guess, but it is certain that the company is slowly trying to carve its place in the institutional market.