There’s an insurance gap for crypto investors. A big one. Recent estimates put the total value of available crypto insurance at just $6 billion USD, which might sound like a lot, but consider this: the top three crypto exchanges handle over $1 billion in trade every day.
How many investors view the lack of btc insurance and crypto insurance in general as an unacceptable risk, keeping them and their capital out of the crypto market?
Resolving the insurance gap could provide a huge number of investors with the confidence to finally dive in, creating more growth for everybody.
The big issue for insurers is risk. Cryptocurrencies are only 10 years old, which means that there is almost no history of losses and claims for underwriters to use when modelling the level of risk for insured crypto. Add in the fact that crypto exchanges are a new and unfamiliar concept, and you can understand why insurers are slow to provide more coverage.
Meanwhile, federal deposit insurance is no help, as it typically only applies to fiat deposits in everyday bank accounts - which leaves private insurance to fill the gap.
Every investor accepts that they might lose out as the market rises and falls, but mainstream investors typically don’t worry about the stock exchange getting hacked or simply collapsing. On the flip side, disasters like Mt. Gox, Bitcoinica, Bitfinex and Quadriga still loom large in the minds of many investors, having caused billions of dollars in loss that was never recovered.
It’s all well and good that Coinbase now provides insurance for its customers’ hot wallets, but at just $255 million, that coverage is a drop in the bucket compared to what investors need.
Which is where Blockstation, a Canadian fintech that has developed a digital asset trading platform designed to work with traditional stock exchanges, comes in.
Traditional financial institutions already have the policies and procedures for regulated, insured trading of assets in place. So why reinvent the wheel? Blockstation focuses on building a best-in-class trading platform for the exchange of digital assets like cryptos and security tokens, and partners with stock exchanges to bring that platform to mainstream investors.
By working with established financial institutions, the Blockstation platform is able to provide insurance to investors through:
Market transparency - regulators can monitor market activity in real time, providing confidence to insurers that the source and flow of funds is legal and compliant
Secure, distributed custody with multi-signature vaults managed by the depository, controlled by the depository, stock exchange and licensed brokers, and backstopped by insurance
Private insurance on crypto stored in brokers’ cold vaults
Blockstation recently launched its first pilot with an international stock exchange, inviting investors to trade bitcoin and ether (and eventually other digital assets including security tokens) in a fully insured and regulated environment. The time for insured, secure crypto exchange has arrived.