Cryptocurrency Insurance, the Next Big Industry

5.0

08 Nov, 2021

6 min read

1316 Views

icon
When you consider the volatility of the cryptocurrency environment, insurance for cryptocurrencies becomes critical. Massive thefts of online wallets and exchanges have occurred from the growing value of bitcoin and other cryptocurrencies.

Introduction

As the cryptocurrency markets surge forward, they have begun to attract that attention of players operating within different industries. The insurance industry, for instance, is interested. As per a Bloomberg report, cryptocurrency insurance is set to become the next big industry. This interest stems from the relevance, importance and prevalence with which cryptocurrency is now gaining credence.

What is The Relevance of Insurance in the Cryptocurrency Landscape?

The world of cryptocurrency is primarily made up of start-ups and exchanges owing to which it may not be able to currently provide significant revenue for the insurance industry. Keeping in mind public information available, Coinbase, which serves as North America’s biggest cryptocurrency exchange, has only 2 per cent of its coins insured which are secured under hot storage. The remainder of the cryptocurrency isn’t connected to the internet and whether it is insured or not remains unclear.

The relevance of insurance for cryptocurrencies lies in the fact that there exists plenty of instability within the world of cryptocurrency. The rapid pace at which certain forms of cryptocurrency have gained value has led to major thefts of online wallets along with exchanges. When looking at the impact of these results in their entirety, it is that there exists a vulnerability inherent to the cryptocurrency world that the traditional finance ecosystem either overlooks or disregards.

Insurers presently face a number of challenges when considering cryptocurrencies.

  • Ordinarily, insurance premiums are determined keeping in mind historical data. This data isn’t available in the case of cryptocurrencies. 
  • Volatility in terms of a cryptocurrency’s valuations which imply three-figure price changes aren’t out of the ordinary, they are equally capable of impacting premiums. This is because they reduce the total figure of coins that are insured. 
  • There is also a layer of regulatory uncertainty and the absence of oversight in terms of cryptocurrency exchanges which can adversely impact insurers seeking to provide their services to this industry.

Cryptocurrencies have always been an element of interest to insurance companies. In 2015 for instance, Lloyd’s released a report outlining risk factors associated with certain cryptocurrencies. They highlighted the fact that recognized security standards for offline and online storage of cryptocurrency would improve asset risk management and make insurance a possibility.

 

Cryptocurrency Insurance- A Revenue Channel

Problems arising within the world of cryptocurrency can also be a potential stream of revenue for insurance providers. Several insurance products targeting cryptocurrency are tailormade and designed to suit client preferences.

Start-ups and companies functioning within this industry for instance often avail of theft coverage which covers cyber insurance and crime. This coverage, however, does not include hacks. To secure this cover, start-ups may pay up to 5 per cent of their coverage limit. Annual premiums can amount to as vast a figure as USD 10 million to secure theft coverage. In instances of large figures, the coverage is shared by a number of underwriters who are paid between USD 5 million to USD 15 million such that no insurer is held responsible in case of any hacks.

Insurance companies have liked the opportunity available and have formulated new methods to calculate premiums.

Conclusion

Initial Coin Offerings and cryptocurrencies alike involve high risks and a lot of speculation. Different investors have different risk profiles and considerations to account for. Owing to these very facts, investors must always seek out the opinions of professionals prior to making any major financial decisions. While the risks associated are paramount with this sector, they also pave the way for insurance providers who hope to carve out a big industry within this space.

Frequently Asked Questions

Q1. Why is insurance relevant to the cryptocurrency space?
A1. Insurance is relevant to cryptocurrency as there exists a lot of volatility within its ecosystem. The speed with which varied cryptocurrencies have amassed value has led to several thefts online pertaining to online wallets as well as cryptocurrency exchanges. The impact of this goings-on in its entirety renders the cryptocurrency world vulnerable. This vulnerability is either overlooked or not considered by the mainstream financial ecosystem.

Q2. What are some common challenges insurers face when addressing cryptocurrency?
A2. Challenges faced by insurers when viewing cryptocurrency pertain to the lack of historical data available which impacts the ability to determine premiums. Volatility is also a concern as it is capable of impacting premiums. When volatility occurs, the number of coins insured may fall.  Regulatory concerns and issues pertaining to oversight with cryptocurrency exchanges can impact insurers abilities to provide offerings within the cryptocurrency landscape.

 

Disclaimer: Angel One Limited does not endorse investment and trade in crypto currencies. This article is only for education and information purposes. Discuss with your investment advisor before making such risky calls.

How would you rate this blog?

Comments (0)

Add Comment

Related Blogs

  • icon

    Ratan Tata's Youngest...

    15 May, 2022

    4 min read

    READ MORE
  • icon

    How are Dividends on Stocks Taxed?

    29 Jul, 2021

    8 min read

    READ MORE
  • icon

    SEBI revises risk...

    07 Dec, 2021

    8 min read

    READ MORE
  • icon

    What is Pre-Market...

    10 Feb, 2022

    6 min read

    READ MORE
  • icon

    Top 10 Most Inspirational...

    27 Apr, 2022

    7 min read

    READ MORE
  • icon

    Stock Trading Bot

    03 Nov, 2021

    7 min read

    READ MORE
  • icon

    Tax free Interest Income in India

    22 Aug, 2021

    6 min read

    READ MORE
  • icon

    Upcoming IPO in Nov-2021

    08 Nov, 2021

    8 min read

    READ MORE
  • icon

    LIC Seeks to Appoint CFO

    13 Oct, 2021

    6 min read

    READ MORE
  • icon

    IPO Advantages and Disadvantages

    03 Oct, 2021

    7 min read

    READ MORE
  • icon

    Byju’s IPO Plans

    06 Oct, 2021

    5 min read

    READ MORE
  • icon

    An Introduction to Trading...

    10 Nov, 2021

    7 min read

    READ MORE
  • icon

    The Success Story of Jack...

    22 Oct, 2021

    5 min read

    READ MORE
  • icon

    Success Story of Elon...

    28 Jul, 2021

    9 min read

    READ MORE
  • icon

    Nykaa Success Story -...

    22 Dec, 2021

    8 min read

    READ MORE
  • icon

    Success story – Anil Ambani

    23 Sep, 2021

    6 min read

    READ MORE
  • icon

    Ashneer Grover Biography -...

    28 Feb, 2022

    5 min read

    READ MORE
  • icon

    Taxation Rules for Bond Investors

    03 Jan, 2022

    4 min read

    READ MORE
  • icon

    What is Cryptocurrency?

    09 Oct, 2021

    7 min read

    READ MORE
  • icon

    Success Story of Vijay Kedia

    21 Oct, 2021

    8 min read

    READ MORE
  • icon

    What Happens to Bitcoin...

    14 Feb, 2022

    6 min read

    READ MORE
  • icon

    Should You Invest in...

    10 Oct, 2021

    8 min read

    READ MORE
  • icon

    Deadweight Loss Of Taxation

    31 Jan, 2022

    7 min read

    READ MORE
  • icon

    What is Guerrilla Trading?

    01 Nov, 2021

    7 min read

    READ MORE
  • icon

    Pair Trading Logic

    26 Aug, 2021

    6 min read

    READ MORE
  • icon

    Environmental Impact of...

    09 Nov, 2021

    7 min read

    READ MORE
  • icon

    Foreign Investment Funds...

    02 Feb, 2022

    6 min read

    READ MORE
  • icon

    Margin Trade Funding (MTF)

    21 Aug, 2021

    8 min read

    READ MORE
  • icon

    Understanding Different...

    09 Mar, 2022

    8 min read

    READ MORE
  • icon

    ​​Sugar Stocks Down as Sensex Falls

    29 Oct, 2021

    7 min read

    READ MORE
  • icon

    Taxation of Permanent...

    02 Dec, 2021

    7 min read

    READ MORE
  • icon

    Paytm IPO

    08 Nov, 2021

    7 min read

    READ MORE
  • icon

    Top 5 IPOs of 2021

    01 Feb, 2022

    6 min read

    READ MORE
  • icon

    Futures Options Strategy Guide

    19 Jan, 2022

    8 min read

    READ MORE
  • icon

    Understanding Taxation on...

    26 Oct, 2021

    7 min read

    READ MORE
  • icon

    Options Trading Explained:...

    01 Oct, 2021

    8 min read

    READ MORE
  • icon

    Invesco drags Zee to NCLT

    06 Dec, 2021

    8 min read

    READ MORE
  • icon

    5 Stocks to Watch Out for...

    05 Jan, 2022

    8 min read

    READ MORE
  • icon

    LIC IPO: Benefits for Policyholders

    18 Feb, 2022

    7 min read

    READ MORE
  • icon

    Is Google a Good Investment?

    11 Nov, 2021

    8 min read

    READ MORE
  • icon

    Capital Gains Tax

    23 Mar, 2022

    5 min read

    READ MORE
  • icon

    Forex Trading: A Beginner's Guide

    27 Aug, 2021

    6 min read

    READ MORE
  • icon

    What are ELSS Funds?

    20 Aug, 2021

    8 min read

    READ MORE
  • icon

    10 Ways to Profit in a Bear Market

    30 Nov, 2021

    8 min read

    READ MORE
  • icon

    Clean Science, GR...

    23 Aug, 2021

    6 min read

    READ MORE
  • icon

    Long-Term Investments

    28 Jan, 2022

    7 min read

    READ MORE
  • icon

    How Does Bitcoin Mining Work

    21 Jan, 2022

    7 min read

    READ MORE
  • icon

    Exploring top Retirement...

    08 Oct, 2021

    7 min read

    READ MORE
  • icon

    Crypto Ban in India?

    25 Jan, 2022

    6 min read

    READ MORE
  • icon

    Taxation in 2022:...

    11 Apr, 2022

    7 min read

    READ MORE
  • icon

    Double Taxation Hangs On...

    01 Dec, 2021

    8 min read

    READ MORE
  • icon

    LIC IPO: All we Know So Far

    05 Oct, 2021

    7 min read

    READ MORE
  • icon

    Income Tax in India -...

    02 Oct, 2021

    7 min read

    READ MORE
  • icon

    Welfare Loss of Taxation

    28 Oct, 2021

    7 min read

    READ MORE
  • icon

    Indian Railways Share...

    24 Sep, 2021

    7 min read

    READ MORE
  • icon

    Raamdeo Agrawal: How...

    13 Jan, 2022

    10 min read

    READ MORE
  • icon

    Top 5 eco-friendly cryptocurrencies

    21 Dec, 2021

    9 min read

    READ MORE
  • icon

    How To Use a Moving...

    07 May, 2022

    6 min read

    READ MORE
  • icon

    Stocks to Watch: NMDC,...

    24 Aug, 2021

    5 min read

    READ MORE
  • icon

    Taxation on Mutual Funds

    04 Oct, 2021

    6 min read

    READ MORE
  • icon

    Lenskart Startup Story:...

    29 Mar, 2022

    6 min read

    READ MORE
  • icon

    Preference Shares:...

    17 Mar, 2022

    6 min read

    READ MORE
  • icon

    Investors Walk Away from...

    27 Oct, 2021

    7 min read

    READ MORE
  • icon

    LIC IPO Details: Should...

    18 Feb, 2022

    6 min read

    READ MORE
  • icon

    What Is Double Taxation?

    11 Jan, 2022

    7 min read

    READ MORE
  • icon

    India’s top 10 favourite...

    22 Dec, 2021

    8 min read

    READ MORE
  • icon

    Exploring Ed-Tech Giant...

    02 Mar, 2022

    8 min read

    READ MORE
  • icon

    IRCTC Stock and Share Split

    03 Dec, 2021

    7 min read

    READ MORE
  • icon

    Blue Chips Fuel Record

    25 Oct, 2021

    6 min read

    READ MORE
  • icon

    Commodities Trading: An Overview

    25 Aug, 2021

    9 min read

    READ MORE
  • icon

    Should you Invest in the...

    30 Aug, 2021

    7 min read

    READ MORE
  • icon

    Gold Bond Investment in India

    07 Oct, 2021

    6 min read

    READ MORE

Translate the power of knowledge into action. Open Free* Demat Account

* T&C Apply

Latest Blog

Ready To Trade? Start with

angleone_itrade_img angleone_itrade_img

Subscribe to #SmartSauda Newsletter

Open an account