Coinbase, the United States’ leading crypto exchange, has revealed the details of its insurance coverage, which it bought to protect its clients’ funds stored at the exchange.
In a blog post published on April 2, Coinbase detailed that it holds an insurance plan covering up to $255 million. The plan was bought from Lloyd’s of London-registered broker Aon.
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Philip Martin, chief information security officer of the exchange, detailed that the main purpose of Coinbase’s insurance coverage is to protect its hot wallets – the online crypto wallets which are often targeted by cybercriminals. Martin also revealed that the exchange is holding the insurance plan since mid-November 2013.
“We currently hold a hot wallet policy with a $255 million limit placed by Lloyd’s registered broker Aon and sourced from a global group of US and UK insurance companies, including certain Lloyd’s of London syndicates,” Martin stated.
Detailing the need of insurance policy for the crypto exchange, he added: “The rationale has remained the same the entire time: if the worst happens and Coinbase loses customer funds, customers deserve certainty that they will be made whole.”
“The data is clear that, today, the most likely consumer loss scenario for any cryptocurrency company is hot wallet loss due to hacking.”
The San Francisco-headquartered exchange holds only two percent of its clients’ digital assets in hot wallets, according to Coindesk.
Martin also outlined that Lloyd’s of London functions as its own partially-mutualized insurance marketplace rather than an insurance company as it allows syndicates of multiple underwriters to pool and spread risks.
No Insurance for Crypto?
Though providing insurance for the protection of crypto assets might be lucrative, a recent Bloomberg report revealed that global insurers are keeping a distance from the nascent industry.
An analysis report by Finance Magnates published last month detailed the complexities faced by crypto-businesses to gain proper insurance plans.