Coinbase Announces Insurance Coverage Details

Date : 04/10/2019 @ 6:19PM
Source :ADVFN Crypto NewsWire
Stock : Bitcoin (BTCGBP)
Quote : 7307.40000000  -50.88000000 (-0.69%) @ 5:37PM
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Coinbase Announces Insurance Coverage Details


 
 

Bitcoin Global News (BGN)

April 10, 2019 -- ADVFN Crypto NewsWire -- Up to $255 million is the total insurance covered for Coinbase customer hot wallet balance totals. This is huge in comparison to most exchanges where there is no insurance coverage whatsoever. Coinbase notes that the total value of customer hot wallets is actually less than 2% of their total custody services, which is roughly $25 billion.

 

Is Lloyds The Crypto Choice?

The policy was created with Lloyd’s registered broker Aon through a pooled global group of US and UK insurance companies. Lloyd’s gathers a range of specialist insurance markets dealing with everything from crime and cyber attacks to natural disasters, and seems to be becoming the go to insurance group relating to potential losses of crypto assets.

Lloyd’s is steadily becoming more visible, for a certain class of crypto customer at least. Last month security specialists BitGo trumpeted $100 million of cover for crypto held in cold storage and went as far as naming the lead Lloyd’s underwriter of the policy.

“We’re glad to see that Coinbase is following our lead in bringing more transparency to the discussion of insurance for digital assets. Insurance is complex and transparency is essential for building trust.” - Clarissa Horowitz, VP marketing, BitGo

 

Value In Transit or Asset In Transit?

It has already been an ongoing battle for most countries around the world to develop working regulations for cryptocurrency, blockchain based assets and tokenized assets. They have been defined as commodities, currency, property, securities and investments. This is now raising issues with insurance coverage. When a company claims that their customers cryptocurrency is covered by insurance, what exactly do they mean?

Any consumer loss scenario for any cryptocurrency company is most likely going to be due to hot wallet hacking. In the UK this would be considered a crime insurance market event, whereas a theft from cold storage would be covered in the specie marketplace. The main difference being whether or not the asset is in transit.

In specie is a Latin phrase meaning "in its actual form.” In financial terms, this is represented when an asset is distributed as-is, rather than being sold and distributed as cash. This applies essentially only to cold storage cryptocurrency. It would not cover a loss of funds that occurred due to an on-blockchain failure, such as a vulnerable smart contract multi-signature implementation.

“Companies should focus on insurance for value in flight. This means that exchanges and wallets should have sufficient crime coverage to fully cover their hot wallets (including enough buffer to handle asset price spikes).” - Philip Martin Coinbase VP of security

Crime policies cover things like theft of cash in ATMs and armored cars. In cryptocurrency, this be things like hacking, insider theft, and fraudulent transfers. Included in this are fiat currency and hot wallet cover in addition to the physical damage or theft of private key data in cold storage.

“We need a world where the ultimate owners of cryptocurrency are able to directly insure their assets stored with trustworthy, well-reviewed, transparent service providers,”- Philip Martin

 


By: BGN Editorial Staff

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