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Overview
Thousands of cryptocurrencies exist in the digital marketplaces today, far more than the number of fiat currencies. Although cryptocurrency isn’t anything new, this industry is often viewed as emerging, mainly because of the uptick in pace. On that note, cryptocurrency markets often experience severe fluctuations, making investment manias and panics a reality.
Companies operating in this space must be highly resilient. In addition to the extreme highs and lows, regulatory bodies typically respond to the cryptocurrency industry aggressively or with complete indifference. Recently, the Biden Administration issued an Executive Order regarding responsible innovation in the crypto space. We expect more regulations to unfold soon, further complicating this fast-paced industry.
Why is Insurance for Cryptocurrency Companies Important?
Neither SPIC nor the FDIC insures crypto assets, so there is little federal protection for the digital exchanges. Cryptocurrency companies must navigate through the complexity of cybersecurity with little (or inconsistent) guidance from the government or various regulators lighting the way. Unsurprisingly, the risk of malware and other cybersecurity threats is incredibly high in this industry.
Many cryptocurrency companies have difficulty attracting and retaining crypto-competent employees, not to mention juggling the frustrating market volatility. Data protection and privacy controls are another top priority. Like any other business, cryptocurrency companies must handle their finances savvily, which can be a chore in such a unique industry. Insurance is critical for cryptocurrency companies to protect digital assets and their longevity in the industry.
Regulatory Inconsistencies
The government’s approach to cryptocurrency has varied from aggressive to indifferent. Recently, we’ve experienced increased awareness from US regulators regarding responsible crypto innovations.
Human Resources
Although cryptocurrency isn’t new, CEOs face challenges recruiting crypto-competent workers. More than ever, cryptocurrency companies must offer highly competitive employee benefits to attract and retain top talent.
Market Volatility
Like any investment, cryptocurrency companies must ride the ebb and flow of the open market. What’s more, headlines seem to influence cryptocurrency markets more intensely than others. These fluctuations are often tricky to navigate.
Hackers
Cryptocurrency exchanges are digital, making them vulnerable to cybercriminal attacks, malware, and technical glitches. Sadly, the pandemic created a digital environment ripe for costly cyber threats.
Recommended policies for Cryptocurrency Companies
Core Coverage
These coverages form the foundation of any risk management program for Cryptocurrency companies:
General Liability
General liability offers broad protection against some of the most fundamental risks companies face. Known as “slip-and-fall” or “all-risk” insurance, this policy covers personal or property damage and bodily injury occurring on the business premises.
Workers' Compensation
When employees sustain work-related injuries, employers are typically responsible for their medical costs and lost wages. This policy covers these expenses, protecting employees while simultaneously keeping Fintech companies running smoothly.
Employment Practices Liability Insurance
Any company with employees faces the risks of allegations, such as discrimination, wrongful termination, breach of contract, etc. This coverage protects companies against lawsuits related to employment practice
Cryptocurrency Specific Coverage
These policies are essential for or can be tailored to the needs of companies operating in the Cryptocurrency space:
Directors & Officers Insurance
Shareholders, competitors, investors, etc., can sue a company’s directors and officers, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business. In the Fintech space, we recommend blended coverage of D&O and E&O insurance.
Errors & Omissions Insurance
Professional liability, also known as errors and omission (E&O) insurance, covers companies in third-party or client lawsuits claiming substandard work or service. Work errors or oversights, missed deadlines, budget overruns, etc., often result in costly cases — but E&O insurance responds to these mishaps.
Cyber Insurance
Cyber insurance protects companies from third-party lawsuits relating to electronic activities (i.e., phishing scams). Plus, it offers many recovery benefits, supporting data restoration and reimbursement for income lost and payroll spent.
Crime Insurance
Whether employees steal from you, a thief robs your armored car, or you receive a forged check or fraudulent wire transaction, money theft happens in many ways. Crime insurance guards your company against damages from these particular crimes.
Digital Asset
A cybercriminal can use private key details to hack into a wallet and digitally transfer cryptocurrency into their anonymous account. Digital asset coverage protects against such hacks, providing protection from crimes and theft via electronic activity.
Types of Cryptocurrency Companies that need insurance
- Bitcoin exchange
- Electronic trading platform
- Asset management
- Peer-to-peer lending
- Decentralized application
- Gaming
- Digital currency exchange
- Fintech
- Payments
- Metaverse
- Open-source software
- Marketplace
Cryptocurrency Frequently Asked Questions
The cost of insurance for Cryptocurrency companies will depend on several things, including the company’s size and development stage. Other factors include:
- Exposures: risks being insured
- Company practices: views on safety, compliance, and risk management
- Program structure: the amount of deductible and willingness for a company to assume more risk
- Claims history: the type and amount of past claims against the company
