PwC: Lack of Insurance Hurting Crypto Industry
According to Big Four auditor PricewaterhouseCoopers (PwC), cryptocurrency businesses are finding it almost impossible to insure themselves against the risk of hacking and theft because of which large fund managers are reluctant to invest in the nascent market.
Investors Interested in Cryptos
Henri Arslanian, PwC’s fintech and cryptocurrency head for Asia underlined the contradictory situation crypto businesses were facing when trying to attract investors.
He stated that most institutionally minded crypto-based companies wanted to buy insurance. Added to that, in many cases, having insurance was a legal or regulatory requirement. Unfortunately, despite their best efforts, being able to buy insurance was well nigh impossible.
According to a Greenwich Associates survey that had been published in September this year, about 72% of institutional investors who responded to the survey stated that they believe that cryptocurrencies have a place in the future.
In fact, in November, Allianz’s chief economic advisor, Mohamed El-Erian, averred that cryptocurrencies would see greater adoption once institutional investors began to invest in the industry.
Most institutional investors have held back from investing in the crypto industry for two main reasons – a lack of regulations and a lack of secure infrastructure for storing as well as trading in cryptos which has led to numerous hack attacks and price declines.
If crypto related companies were able to get insurance, this could possible allay some concerns that regulators had about cyber security.
Insurers Do Offer Insurance to Crypto Companies
The insurance companies, on the other hand, claim that they do provide insurance cover to crypto firms.
Risk advising firm Aon’s Asian financial services and professional group’s commercial solutions’ regional director Thomas Cain stated that their company had received about 2 dozen inquiries in 2018 from crypto vaults as well as crypto exchanges that were looking for insurance cover.
Cain stated that it was not difficult to provide insurance cover to companies that held large amounts of crypto-assets. However, given that the asset class was still new, as well as the publicity that the recent hack attacks had received, crypto firms applying for insurance needed to distinguish themselves before they were willing to sell them insurance.
One cryptocurrency broker, on condition of anonymity because of the sensitivity of the subject, contradicted this claim. He stated that insurers were struggling to understand crypto and Blockchain technology as well as its impact and implications and so were reluctant to offer insurance to crypto related firms.
He also stated that those insurance companies that were willing to offer insurance were only willing to do so with limited cover. According to the broker, there is no insurance company that is willing to offer coverage that is meaningful enough to make the insurance worthwhile.