One of the most popular cryptocurrencies is also the one that started it all: Bitcoin. In early 2009, Bitcoin was released by Nakamoto to the public. This cryptocurrency was first supported by a small number of early adapters and its initial value was just around US$0.0008.
Following the year 2011, Bitcoin has had dramatic rises and falls that started to get more people talking about it. And now, the value of Bitcoin has surged up to $65,703 or CAD$81,856.
Because Bitcoin, and other types of cryptocurrencies are unlike any other currency that society has ever handled, there are unique risks faced by businesses that invest in, use, or facilitate the use of Bitcoin.
So in line with this, some businesses ask, “Is cryptocurrency covered by insurance?” The answer is YES, it can be.
But this is the kind of answer that leads to even more questions. Therefore, this guide was written to answer all your burning questions about the what, why, and how of cryptocurrency insurance.
Let’s get started!
What Are Cryptocurrencies?
Cryptocurrencies are digital or virtual currencies that typically rely on blockchain technology to record transactions and prevent counterfeit. The world of cryptocurrency exchange is thus typically characterized by the lack of central authority because the ledgers are in different computers. To many, this is considered a strength because cryptocurrencies that operate using blockchain technology are, in theory, immune from government manipulation.
Furthermore, anonymity or pseudonymity is also a characteristic of cryptocurrency exchange due to its manner of operation. This is yet another strength of cryptocurrencies that many users find useful.
Putting the above elements together, cryptocurrency can be exploited by cybercriminals in two main ways:
- The ransom amount for ransomware is typically requested by hackers to be paid through cryptocurrencies like Bitcoin.
- Cryptocurrency theft is a perennial risk.
Why Do Cryptocurrencies Need Insurance?
As we discussed earlier, hackers can take advantage of the way cryptocurrencies work. This is how hackers demand ransoms. They can also steal cryptocurrencies.
Though the blockchain is extremely difficult to hack into, hackers can still find ways to access digital wallets. Digital wallets can belong to businesses or individuals using a platform for buying or exchanging cryptocurrency.
This latter issue of cryptocurrency theft is why cryptocurrency insurance was conceptualized. Cryptocurrency insurance can protect a business or investor from financial loss following:
- The theft of cryptocurrency; or
- A data breach related to cryptocurrency.
To get more insight on why cryptocurrency insurance is needed by investors and businesses involved in the use, exchange, storage, and the securitization of cryptocurrencies, check out our article “4 Reasons You Need Insurance for Cryptocurrency.”
Can Stolen Cryptocurrency Be Recovered?
The world of cryptocurrency is typically characterized by anonymity or pseudonymity, as well as the lack of a central authority. These can be advantageous in some respects, however, these also mean that if an investor or business suffers a cryptocurrency theft, it is highly unlikely that they will get a portion of any of the stolen assets back.
In theory, it’s possible to trace stolen cryptocurrency through blockchain records. However, anonymity or pseudonymity makes it nearly impossible to pinpoint the perpetrator or hold on to the trail too long.
Has Stolen Cryptocurrency Ever Been Recovered
In 2021, there was a somewhat rare case of cryptocurrency theft wherein a majority of the stolen assets were returned. This case involved a company called Poly Network, a cryptocurrency platform. The hacker(s) were able to steal a total of around $600 million worth of Bitcoin by exploiting a vulnerability in the platform. Later on, in a surprising turn of events, the hackers decided to return most of the hacked assets.
Sadly, few companies are this fortunate. Some cryptocurrency platforms or businesses are forced to cope with the loss or even close down following a case of cryptocurrency theft or data breach.
Does Cryptocurrency Insurance Protect Against Volatility?
The cryptocurrency landscape is volatile by nature. In fact, for many investors, this is half of the worry they face. The other half would be cryptocurrency theft, which is also a perennial risk faced by businesses that use or facilitate the use/exchange of cryptocurrency.
Cryptocurrency insurance can’t shield anyone from the volatility of cryptocurrency assets. However, this type of insurance can protect against losses related to cryptocurrency theft and data breaches related to cryptocurrency. For both investors and businesses, this type of insurance can therefore help a great deal.
What Does Cryptocurrency Insurance Cover?
Cryptocurrency insurance can take on different coverage points, depending on the entity to be insured. Here are some examples of coverage points that cryptocurrency insurance can have:
- Crime liability - coverage for cryptocurrency theft and loss.
- Cyber liability - coverage for instances of a data breach that compromises customer information and thereby leads to lawsuits.
- Directors & Officers’ Legal Liabilities - protection for instances of lawsuits and criminal investigations towards directors and officers related to an instance of cybercrime or a data breach.
- Product Negligence, Errors and Omissions - protection for the business and its employees when charged with negligence or inadequate work following a cybercrime incident.
Reliable Cryptocurrency Insurance For Your Business
That wraps up our article and answers your question: “Is Cryptocurrency Covered by Insurance?”
KASE Insurance is an award-winning insurance brokerage firm based in Ontario. If you or your business invests, uses, stores, or processes cryptocurrencies, our specialized cryptocurrency insurance is for you.
Our service goes beyond just setting up your insurance. Once your cryptocurrency insurance is ready to go, our team will always be there to help with your insurance needs – whether you want to update your policy, follow up on claims, and more.