Cryptocurrencies have flourished in the last few years because of the uniqueness it brings to the market. One of its standout features is that digital money or cryptocurrencies are independent from the normal banking system.
This allows crypto users to carry out transactions and maintain their anonymity. Plus crypto helps users avoid a lot of the fees associated with traditional banking. However, its plus points also tend to be its negative points as there is a not a lot of infrastructure backing crypto currencies. One example is the lack of insurance coverage.
Whether you are a business or an individual who is dealing with cryptocurrencies, you realize that if you lose access to your crypto, then it is lost and cannot be recovered. An excellent example of this was when QuadrigaXC, a Canadian exchange, lost access to its funds because its owner died. Access to over $100 million worth of funds was lost and 115,000 of the exchange’s clients are not able to get their money back.
It does not help that hacking and security breaches seem to be an ongoing occurrence when it comes to the cryptocurrency world. Without insurance, crypto users are unable to get their money back. The lack of a safety net has caused a lot of investors to shy away from investing in cryptocurrencies.
To protect companies that have investments in crypto, a new industry has appeared: cryptocurrency insurance. These insurance plans will cover individuals, companies, and exchanges. The appearance of this service is a good sign that the industry is moving towards legitimacy slowly but surely.
Full Coverage Not Provided
However, industry experts believe that crypto insurance does not cover all the possible situations that might come up. Insurance companies are also looking to profit and hence experts are concerned that these crypto insurance contracts will have cleverly designed loopholes that will enable insurance companies to avoid paying out or paying a lower amount. For example, some might claim that there are limits to the coverage, which is fair but still puts the investor at risk.
Despite the lack of full coverage, they are still very important. Currently, only five insurance companies are offering crypto insurance. This is not good enough to meet the growing demand as a lot of crypto firms are looking for ways to get full insurance. Regulators around the world are now imposing regulations where it is mandatory to offer crypto insurance.
Crypto companies are feeling the heat as there are not a lot of options when it comes to crypto insurance and the companies that do offer crypto insurance do not provide full coverage.
