Crypto Virtual Wallet Hacks Push Companies Towards Insurance, Advanced Security Technologies
The growing number of crypto platform hacks is petrifying and virtual wallet companies are investing in advanced security solutions and insurance products to mollify investors.
SFOX a digital asset dealer is among the latest agencies to join the trend. According to the announcement, it has partnered with M.Y. Safra Bank to offer traders unique deposit accounts that are insured by The Federal Deposit Insurance Corporation (FDIC). Depositors enjoy a $250,000 insurance coverage.
The FDIC was created to promote public confidence in America’s banking system. It is a federal agency that operates using pooled funds contributed by the country’s financial institutions. The FDIC supervises over 4,000 banks.
Beyond the insurance benefit, the alliance will allow traders to have greater liquidity when trading fiat currency pairs. SFOX says the following about the arrangement.
“Beyond making funds more secure, this new facility with M.Y. Safra Bank significantly reduces the time required to make funds available for trading, making trading more efficient.
These product features are especially transformative for funds and institutional investors, who will be better equipped to fulfill their custodial obligations while still being able to easily access their funds when they need to trade quickly.”
More Crypto Companies Announce Insurance Partnerships
Curv, a cryptocurrency wallet company has also jumped on the insurance bandwagon. The agency which offers custodial services to institutions recently publicized its union with Munich Re, a German-based insurance firm.
According to the press release, a $50 million contract will provide compensation to clients in the event of a security breach that leads to a loss of funds.
Curv currently relies on multi-party computation (MPC) technology to verify transactions hence eliminating the need for private keys which usually require additional security safeguards.
The solution allows transactions to be cryptographically verified in a parallel, independent setup that prevents a data compromise in one node from affecting any others.
The company highlights that in the event of a breach affecting one of its customers, no other wallets can be affected. It stresses that the insurance cover only kicks in if a transaction occurs outside provided company policies.
There is no private key theft coverage because none are involved in the first place. Clients can designate who can transact on the system, place limits on the amount of funds that can be transferred in an instance and when they can be executed.
That said, however, the Munich Re insurance policy does not cover losses caused by a client or his employees’ due to negligence or theft by staff members. As such, customers are expected to undertake their own internal risk profile assessment before setting up the fund and wallet usage criterion.
Major Crypto Companies That Already Insure Assets
Coinbase has for a long time now had asset insurance and its plan mainly covers losses caused by a compromise on its hot wallet systems. Its compensation scheme has apparently been on since November 2013 and features a $255 million limit. Its policy is jointly covered by a collective of insurance companies under Aon’s brokerage scheme.
In February, another cryptocurrency custodial service company, BitGo, announced an insurance plan for its clients that provides compensation in the event of asset theft and private key loss. BitGo’s plan is provided by Lloyd’s and covers up to $100 million in digital assets.
An Emerging Market
The cryptosphere is the Wild West of the financial sector. The industry is still largely unregulated and has a checkered history with hacks that have led to gargantuan losses. That said, however, the insurance safety net trend is likely to boost investor confidence in the long run, especially now that things are looking up again.
Currently, more insurance agencies are looking to extend their offerings to cover digital assets. Marsh and Aon reportedly dominate the cryptocurrency insurance segment with the latter claiming coverage of over 50 percent of the sector.
Right now, the insurance industry is said to be willing to cover only about $6 billion in crypto assets. This is an abysmal amount considering that the current market cap is at approximately $230 billion. Both sectors will need to seek greater cooperation to ensure sustained investor confidence in the new revolutionary asset class.
(Featured Image Credit: Pixabay)
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ABOUT THE AUTHOR
ABOUT THE AUTHOR
Elizabeth Gail is a crypto-enthusiast and blogger. Her specialties include cryptocurrency news writing and analysis. When not writing about crypto, she’s out taking part in humanitarian endeavors across the world. For any news tips or coverage, you can reach out and engage with her on Twitter at @Lizbarret001. You can also email her at gailelizabeth100 (at) gmail dot com.