Cryptocurrency markets have been maturing over the last few years, making demand for crypto insurance solutions larger as more advanced players dip their toes into the nascent ecosystem.
Investopedia reports that cryptocurrency insurance is seen as a “big opportunity,” with a spokesman from one of the world’s largest insurers, Allianz, saying that the company has explored product and coverage options in the cryptocurrency space as it becomes “more relevant, important and prevalent on the real economy.”
The cryptocurrency ecosystem is still seen as dangerous and volatile, where funds aren’t completely secure even on leading cryptocurrency exchanges. While some platforms, including Coinbase, have revealed they have hot wallet coverage via specific insurers, most don’t publicly promote whether assets deposited there are insured.
The industry poses specific challenges for insurers. For one, premiums are often defined with the use of historical data, which in the cryptocurrency industry is slim at best and absent in newer areas including nonfungible tokens (NFTs).
Demand for insurance in the space is nevertheless present, as crypto exchange Crypto.com has expanded its insurance program to cover $750 million in 2021, and decentralized solutions based on decentralized autonomous organizations (DAOs) like Nexus Mutual have been created.
Speaking to Cointelegraph, Tony Lees, chief product officer at digital payment platform Wirex, said one of the key blockers for “true mainstream adoption over the last few years” has been the thought that the cryptocurrency space is “untrustworthy and insecure.”
To Lees, most users feel that their funds are unsafe and that an investment in crypto assets is riskier than an investment in the traditional stock market. Industry-standard compliance and other regulations, Lees added, have helped platforms showcase how users’ funds are safe. Lees said:
“Corporate-level insurance coverage with custodial platforms such as Fireblocks has enabled companies like Wirex to demonstrate that robust systems and controls are in place in order to give the user peace of…