As digital asset industry has revolutionised the way wealth is managed, digital asset insurance has evolved to provide innovative solutions to safeguard digital assets such as cryptocurrencies and non-fungible tokens (NFTs) against unforeseen risks. Here we take a brief look at how the industry has evolved, why the insurance industry has been slow to catch up and what is currently available to help digital assest companies manage their risk.
A brief history of the digital asset industry
Since Bitcoin was introduced in 2009 the financial ecosystem has been changing at a rapid pace.
Over the course of the 2010s, blockchain technology entered the mainstream, marking the beginning of the crypto revolution. This led to a proliferation of digital assets including cryptocurrencies, tokens, non-fungible tokens (NFTs), and various other blockchain-based assets.
Decentralised Finance (DeFi) has enabled traditional financial services like lending, borrowing, and trading to be conducted on blockchain platforms without intermediaries. This has democratised finance, providing access to financial services to individuals who were previously excluded from the traditional banking system.
NFTs have also revolutionised the art, entertainment, and collectibles industries, enabling artists and creators to monetise their digital works directly by enabling the ownership and provenance of unique digital assets to be recorded on the blockchain.
The growth of the digital asset industry
As the industry matured, it began to garner interest from mainstream financial institutions, corporations, and governments. Major companies started accepting cryptocurrencies as payment, and traditional financial players began exploring blockchain technology for efficiency improvements.
The digital asset industry has disrupted numerous sectors from finance to supply chain, gaming and entertainment, and from real estate and healthcare. As it continues to evolve, it will likely reshape more sectors and redefine the way value is created, exchanged, and owned in the digital age.
The digital asset industry has brought about remarkable advancements, but there are many challenges to resolve including regulatory uncertainties, scalability issues, and environmental concerns related to energy-intensive mining processes.
The growing demand for digital asset insurance
Another major challenge for companies operating in the digital asset industry is protecting their assets. As the industry has evolved, so have high-tech storage solutions. Nevertheless, the security of digital assets remains a huge problem. It will never be possible to eliminate entirely the chance of theft. Indeed, according to Chainalysis, in 2022 alone, over $20bn dollars of crypto assets were stolen or lost through hacks and scams.
Insurance to protect digital assets is essential given the high threat of an attack. Yet although demand has exploded, the insurance industry has been slow to respond for a number of reasons.
Lack of supply of digital asset insurance
Insuring digital assets presents a unique challenge due to the dynamic and evolving nature of the digital asset industry. The intrinsic complexities of blockchain technology, coupled with the inherent risks associated with hacking, fraud, and regulatory uncertainties, create a landscape where traditional insurance models have struggled to provide comprehensive coverage.
Rapidly changing market conditions and a lack of historical data make it difficult for insurers to accurately assess and price risks. As a result, legacy insurers have been hesitant to underwrite policies. In addition, the relatively unregulated nature of the digital asset space can make insurers wary of potential liabilities stemming from unanticipated events.
Addressing these challenges requires innovative approaches that incorporate technology-driven risk assessment and collaboration between insurance providers and the digital asset ecosystem.
The scarcity of adequate insurance solutions tailored specifically for digital assets has been a significant hurdle for a nascent industry, but this is starting to change.
Digital asset insurance solutions
Digital asset insurance is a tailored protection strategy designed to shield the holders of digital assets from financial losses due to various risks such as theft, cyberattacks, hacking incidents, and accidental damage. As the value and prevalence of cryptocurrencies and NFTs have surged, the need for comprehensive coverage has become paramount.
Continuum is at the forefront of this new frontier, specialising in digital asset insurance with policies that cater specifically to the unique challenges posed by the virtual nature of these assets.
Crime Insurance: Safeguarding against digital threats
An important type of digital asset insurance is crypto insurance. This focuses on safeguarding cryptocurrency holdings from cyber threats and malicious attacks. Crypto insurance provides coverage against losses arising from hacking incidents, phishing attacks, ransomware, and other cyber-related risks. With hackers becoming increasingly sophisticated, crypto companies and individuals need to fortify their assets with robust insurance policies to ensure their financial security. Crypto insurance not only offers a safety net but also contributes to building trust and confidence in the cryptocurrency ecosystem.
Specie Insurance: Protecting tangible digital assets
Specie insurance is another vital type of digital asset insurance that extends protection to tangible, physical items of high value, such as hardware wallets, cold storage devices, and NFT artwork. These assets, often referred to as ‘specie’, hold immense worth in the digital world. Specie insurance policies cover losses due to theft, physical damage, accidents, and other unforeseen circumstances. As NFTs gain prominence in the art and collectibles space, specie insurance plays a crucial role in safeguarding these valuable digital possessions.
Tailored digital asset insurance for crypto, digital assets and NFTs
Continuum specialises in providing digital asset insurance to meet the specific needs of digital asset custodians, digital asset exchanges, wallet providers, trading platforms, mining companies and NFT and tokenisation platforms.
We offer bespoke insurance solutions that address the unique risk profiles of these companies. Our insurance policies offer financial protection and foster trust and security within the digital asset community.
We work closely with clients to assess their digital assets, determine potential vulnerabilities, and craft policies that provide comprehensive coverage. This personalised approach ensures that clients receive the exact protection they require to operate confidently in the digital landscape.
The future of digital asset insurance
As the digital asset landscape continues to evolve, so does the landscape of digital asset insurance. Continuum is adapting to the changing needs of the digital era, constantly innovating to develop bespoke insurance policies and more efficient and comprehensive coverage for this ever-expanding digital ecosystem.
Contact us to discuss your digital asset insurance requirements including crypto insurance and specie insurance
