UK-based insurance behemoth Lloyd’s of London has announced its move to provide crypto-insurance services for funds held in cryptocurrency hot wallets.
Lloyd’s Atrium Targets Crypto Insurance Scene
According to The Times, insurance giant and the U.K’s oldest marketplace Lloyd’s of London has launched a new policy geared towards protecting crypto investors. The company announced the news via a press release published on Sunday (March 1, 2020)
The policy is reportedly worth $128,000 (£100,000) and will ensure insurance for investors should their crypto wallets suffer a hack. Atrium, a subdivision of Lloyds made up of underwriters is reportedly responsible for developing the crypto insurance policy.
According to Atrium, the recent rise in reports of crypto-related hacks prompted the syndicate to consider a crypto insurance policy tailored to the needs of investors. Commenting on the policy, Atrium underwriter Matthew Greaves said:
“There is a growing demand for insurance that can protect cryptocurrency as it becomes increasingly popular. It is a testament to Lloyd’s that the market has put together an innovative solution to mitigate these new risks and protect against theft – from physical as well as online vaults – thereby providing customers with peace of mind that their assets are safe.”
Atrium reportedly developed the policy for Coincover, a digital asset insurer which launched the first-ever cryptocurrency insurance service back in September 2019. David Janczewski, a chief executive at the firm remarked:
“With this innovative new policy, we can remove these barriers and broaden the appeal of crypto. It represents another step forward in enabling cryptocurrency adoption.”
Underwriters from Lloyd’s syndicate have said that the new policy will allow Coincover to provide liability insurance designed to offer protection for crypto funds stored in hot wallets. Theft, malware attacks, and other malicious hacks all fall under the purview of the new crypto insurance policy.
Cryptocurrency Insurance for Hot Wallet Funds
The Atrium designed crypto-insurance policy comes at a time when crypto-related hacks are on the rise. In 2019 alone, cybercriminals reportedly stole over $4 billion from crypto wallets, exchanges, and other businesses.
Many of these thefts have occurred because hot wallets are vulnerable to malicious cyber intrusion. Thus, regulators in different countries are demanding that cryptocurrency exchanges maintain the bulk of their user deposits in secure cold wallet storage.
However, cold wallets while offering robust security can be cumbersome for the quick-paced nature of the crypto trading scene where arbitrage opportunities can occur and disappear quickly. The emergence of cryptocurrency insurance might make hot wallets a viable proposition for holding crypto funds, if only for short periods.
Exchange platforms like Bithumb in South Korea have also updated their terms of service, indicating that they will cover all customer losses due to security breaches or other unforeseen circumstances.