Like any other commodity, cryptocurrency firms can secure themselves against constant threats of cyber attacks by insuring their businesses.
FREMONT, CA: The popularity of cryptocurrency is constantly growing. Along with that, the risk factor concerning cryptocurrencies is also on the rise. On various occasions, hackers have targeted dealers and cryptocurrency exchanges, necessitating risk transfer mechanisms that the insurance industry can offer. It is possible to insure Cryptocurrencies, just like any other commodities for which insurance companies provide policies. While most insurance firms are still planning the move to introduce insurance products for crypto, several leading firms have already invested in this direction. Alternatively, insurance companies also have an opportunity to engage a new category of customers by offering cryptocurrency insurance.
Cybersecurity issues are the main reasons driving the demand for insurance coverage of digital currencies. Based on a research report, cryptocurrency accounting over $4 billion was lost to fraud in 2019. Thus, it is evident that firms and individuals offering cryptocurrency-related services need a way to protect their business and transfer risks. Otherwise, there are chances that cryptocurrencies will remain unstable and unreliable. Insurers are in a state to leverage this demand and provide insurance policies so as to make crypto-based businesses sustainable.
Crypto insurers today have a difficult time while making investment decisions. Despite the potential that cryptocurrencies possess, trading is limited. By offering an insurance safety net, insurance firms can help make digital currencies safe and valuable. This will make crypto exchanges beneficial. The profits will translate into huge revenues for the insurance industry, as well.
The cryptocurrency market is riddled with multitudes of cyber-attacks, which can severely impact the future prospects of this highly efficient means of transaction. One of the roadblocks that the insurance industry faces as it considers offering insurance to cryptocurrencies is that of compliance. Clear frameworks and policies regarding cryptocurrency trading and transactions are yet to come, which makes it difficult for insurers to underwrite the risks related to digital assets. Insurance companies rely on standard regulations to define risks and offer compensations accordingly. Unless cryptocurrency dealers come up with the means to classify risks, calculating premiums will also be difficult for the insurance firms.
Crypto-dealers and insurance companies need to collaborate and assimilate the technology and resources needed to design and offer insurance for crypto. With the right know-how, crypto-dealers can have a sigh of relief when it comes to financially securing their businesses. Further, the emerging opportunities for crypto insurance are indeed very promising for crypto-dealers.