Coinbase Details $255-million Insurance Cover

Coinbase insurance cover exchange crypto holdings hot wallets BitGo

Leading exchange and wallet service Coinbase has published details of insurance arrangements around its client crypto holdings for the first time, in an unprecedented move in the cryptocurrency sector.

The global exchange service, which serves both retail and institutional crypto investors, confirmed it had cover running to $255 million for cryptocurrency held in so-called “hot wallets” — wallets that are stored online.

Hot wallets are most at risk of external hacks and thefts, and the insurance coverage is designed to protect against losses arising from a catastrophic hack. According to Coinbase, the firm currently holds under two percent of customer assets in hot wallet storage.

While no recent figures were made available, Coinbase was reported to have been storing $25 billion in crypto assets at the height of the market in 2017. With the substantial insurance provision covering just two percent of hot wallet funds, the revelation will provide peace of mind for those using the service.

The Coinbase insurance policy was placed by Lloyd’s broker Aon, sourced from a consortium of companies across the U.K. and U.S. The move is the latest step from Lloyd’s insurers toward embracing the crypto market, with a number of specialist insurance products arising from Lloyd’s underwriters in recent months.

Just last month, BitGo secured $100 million in insurance coverage for their cold wallet holdings, in what was seen as a landmark policy for the industry. Addressing the news of the Coinbase policy, Clarissa Horowitz, vice-president of marketing at BitGo, said transparency in the industry was essential for building trust.

“We’re glad to see that Coinbase is following our lead in bringing more transparency to the discussion of insurance for digital assets. Insurance is complex and transparency is essential for building trust.”

Philip Martin, VP of security at Coinbase, said crypto insurance should focus primarily on the criminal aspect, covering hacks and thefts, rather than “value at rest” cover, which tends to focus on lost private keys.

“Companies should focus on insurance for value in flight. This means that exchanges and wallets should have sufficient crime coverage to fully cover their hot wallets (including enough buffer to handle asset price spikes).”

The policy is the latest step in crypto markets toward the mainstream, providing an additional layer of assurance for commercial and institutional investors in digital asset markets.