There is so much crypto money to hack and steal.
An Anti-Money Laundering report by security research firm CipherTrace shows crypto criminals are likely to loot an estimated $4.3 billion in crypto funds through fraud and theft throughout 2019.
That figure was around $1bn in 2018.
Cryptocurrency exchanges and custodians, marketplaces where you buy, sell and store assets, are hackers’ favorite targets, because billions of dollars in crypto are at play.
Even Binance, the largest crypto exchange reputed for robust security suffered a $40 million theft earlier this year.
Insurance companies are drawling over the opportunity.
Favourable insurance conditions for crypto
Over the past three years, cryptocurrencies’ market value has risen 25-fold, hovering near $300 billion today, according to Forbes.
Theft of crypto assets reached $480 million in the first half of 2019.
Lloyd’s of London is a $45 billion insurance marketplace now emerging as a major player in crypto insurance. It facilitated the $255 million policy that Coinbase announced in April, as well as crypto custodian BitGo’s $100 million policy. Aon, the second-largest broker in the world, also UK-based, brokered the Coinbase policy. Companies that store investors’ cryptocurrencies like Fidelity, Gemini, Anchorage and Kingdom Trust have also purchased insurance.
Experts expect the market for crypto insurance to grow faster than the 20% to 25% pace at which the larger cybersecurity insurance sector is currently expanding.
Two years ago, the market for crypto insurance was “non-existent,” Coalition CEO Joshua Motta says. Today he thinks it’s worth between $200 and $500 million in premium revenue.
The insurance coverage stands at $1 bn marks while crypto-assets market is a $300 bn figure, a huge gap insurance companies aim to fill.
Bakkt, the subsidiary of the Intercontinental Exchange (ICE) which recently received approval from the U.S. Commodity Futures Trading Commission (CFTC) to launch its crypto-settled Bitcoin futures, launched its institutional BTC custody solution.
The launch is part of the physically-settled Bitcoin futures it plans to launch on Sept. 23.
Given the potential size of Bakkt’s Bitcoin holdings, ensuring users are protected from hacking or fraud is essential. To protect these funds Bakkt decided to get $125 million in insurance coverage.
Bakkt‘s contracts were seen as a turning point in the industry. Bakkt may finally bring BTC to mainstream financial institutions by acting as the first physically settled futures contracts on the market.