Crypto wallet to insure assets up to $50 million… but is there a catch?

655
Crypto wallet to insure assets up to $50 million... but is there a catch?

The industry’s first institutional-grade cryptocurrency wallet service provider has announced that it will insure clients’ wallets for up to US$50 million.

Curv has announced that it is now offering up to US$50 million in insurance for clients using the company’s institutional-grade cryptocurrency wallet services.

This is made possible through a new strategic partnership between Curv and Munich Re, one of the world’s leading reinsurance companies, according to the company’s official announcement.

The cryptocurrency insurance coverage is designed to offer protection for users of the Curv cloud-based wallet in the event of an external security breach or malicious behavior by Curv or an employee of the company.

Like most insurance policies, coverage is not automatic. Users will have to opt-in to the service and pay a premium based on the amount of digital assets they have on the Curv platform.

Coverage limitations and conditions

Coverage limitations and conditions

If the contents of a client’s Curv wallet are stolen, then the insurance will kick in and cover the losses.

The company claims that there is no ‘catch’, however, it does stress that clients will need to set up appropriate corporate policies on transferring funds, such as how much crypto can be sent and by whom.

If a client’s corporate controls are too lax, coverage may be denied.

The company explains:

“[If] the corporate control set up by the customer’s administrators on the Curv platform are too loose, a rogue employee or fat finger could trigger an unwanted transaction. Because it could be in-line with the corporate policy configured by their administrators, Curv will recognize it as valid and our insurance won’t cover the loss.”

Curv notes that Munich Re did an on-site risk assessment on the Curv platform in 2018 and has completed a “rigorous due diligence process to assess Curv’s cryptography, cloud deployment, architecture, security model, and code, and validated the threat model and risk structure.”

Confident that insurance will not be necessary

Despite its partnership with Munich Re, the company believes that it is highly unlikely that any user of the platform will ever need to file a claim:

“Our insurance carrier’s confidence in our security model, following a rigorous due diligence process, resulted in their decision to create a new product specifically to support our customers. And while we anticipate that no customer of ours should ever have to file a claim on our service, they can now have the peace of mind that comes with yet another layer of protection for their assets.”

The reason for this sense of optimism is that the Curv cryptocurrency wallet does not have a private key.

For a transaction to occur, Curv uses a cryptographic mechanism that employs multi-party computation (MPC) protocols. These protocols use independently generated shares of cryptographic material for both the user and Curv.

A hacker would need to gain control of both shares – the customer’s and Curv’s – at the same time in order to be successful.

The likelihood of this happening is remote due to the continuous and automated rotation of shares.

Curv also notes that if a hacker does manage to gain access to a person’s wallet, the wallets belonging to other users will not be impacted.

Cryptocurrency still an under-insured industry

Cryptocurrency still an under-insured industry

In a recent report from The Block, it was revealed that more than US$1.35 billion in cryptocurrencies has been stolen from exchanges over time.

Despite this, the cryptocurrency industry – which currently has a market cap of US$229 billion – remains woefully under-insured.

Coindesk reported in November of last year that the total amount of insurance coverage crypto exchanges and custodians was approximately US$6 billion – at most.

When you compare that to the billions of dollars in trades being transacted on a daily basis – Binance alone reports a 24-hour trade volume of US$1.6 billion – that figure is a drop in the bucket.

The crypto insurance market is beginning to grow, however, albeit slowly.

Coinbase, for example, insures users fiat deposits for up to US$250,000 and their cryptocurrency holdings through a US$255 million hot wallet policy issued through Aeon, a Lloyd’s of London registered broker.

Similarly, crypto custodian BitGo announced in February that it, too, was offering US$100 million in insurance coverage to its Business Wallet and Custody clients.