Will Insurance backed Crypto Custodian Services Bring Institutional Investors to Market?
Is the Cryptocurrency Market Ready for Insurance?
We have experienced during the last years how the cryptocurrency market has been expanding all over the world. Virtual currencies expanded, not only in price but also in many other fields. For example, the crypto space has witnessed hacks, violations, frauds, scams and money disappearing from one day to the other.
There have been several companies dedicated to stealing users funds. There were many exchange platforms that were vulnerable to attacks because they did not use the correct systems. Initial Coin Offerings (ICOs) were created with the intention to steal investors’ funds, and so on.
However, there is a possible solution to this problem. This can be solved with custody services in the crypto space. This is one of the latest innovations in the ecosystem and would allow new investors to enter the market.
Cryptocurrency-related custody services are related to a third-party that provides storage and security services for virtual currencies. With improved custody services, the ecosystem will be a much more secure place for investors to start placing their funds. This could be very positive for the long-term price of Bitcoin and other virtual currencies.
At the moment, there are two different crypto custody solutions, the ones that secure the hot storage and those that aim at securing cold storage.
Investing in cryptocurrencies is not easy. And the situation is even much more difficult when institutions realize that there are no services for them to operate properly. Although the crypto market has expanded, there are still some things that should be improved, and this is one of them.
Custody solutions are relatively new to the market and just a few companies are planning to use these solutions. Indeed, these companies are not so sure about what they want as a company. Since they are new services, it is also not clear what clients want to see and use. Nonetheless, the market is already evolving.
At the moment, the market is still developing different solutions related to custody services. There are just a few firms investing in these services that are still expensive and some of the cases are only related to insurance. If these companies want to offer good services they will have to improve the products and offerings they have. In order to attract more institutional capital, these companies have to offer insurance as an industry standard.
It will be a key factor to offer insurance, as many other financial sectors are already doing. In this way, it will be possible to preserve the interest of investors and increase the trust that companies have on the virtual currency industry as a whole.
The recognized cryptocurrency exchange Gemini obtained insurance coverage from a consortium of leading insurance providers. Yusuf Hussain, Head of Risk at Gemini, said that
“It is very important to provide consumer protection and assure that they are all investing in cryptocurrencies in a safe manner. Companies need to know that they will not be attacked by another party and lose their funds.”
Furthermore, custody services are obliged to provide the best security as possible. Without security, there will be no investors. If he custody company is able to make sure that the funds are completely safe they will be able to attract new firms and interested investors.
Finally, a clear regulation on the platform is also very important. Different countries and nations are starting to regulate cryptocurrencies and blockchain technology. However, not every single country has already taken specific measures.
Before providing capital, players in the market want to know that their funds are protected by current laws and a comprehensive legal system. There are some crypto custody service providers that are negotiating with regulatory agencies around the world. The legal framework is a key part of the success of the crypto market.
One of the companies that is already working in these solutions and trying to be compliant in all these issues is the Intercontinental Exchange (ICE) and its Bakkt platform. Bakkt will be using current traditional financial infrastructure applied to crypto and digital assets in the market. In addition to it, it will also focus on security and other services.
During this year, institutions have started to pay attention to the crypto market. The ICE is just one of the many other projects for institutions and wealthy investors that the market could see operating in the near future.