80-year-olds making crypto withdrawals will ‘get a call,’ says crypto exec

September 1, 2024 Coin Telegraph

Turns out, it’s pretty difficult to insure crypto users and platforms

May 28, 2023 Coin Telegraph

A crypto insurance provider will typically assess at least 2,000 variables across 20 risk areas before they even consider insuring a platform, according to an insurance executive.

Crypto insurance providers spend enormous amounts of time judging whether to provide coverage to a crypto company, and almost none of them offer assurances to individuals, insurance and crypto executives told Cointelegraph.

Last year saw $3.9 billion stolen from crypto companies, decentralized finance platforms and users, a massive 22% rise from the prior year — and that’s only counting hacks and exploits. Some believe 2023 could be even worse.

Raymond Zenkich, president of cryptocurrency insurance firm Evertas, told Cointelegraph that it’s a complicated process to initially assess the risks of a crypto platform.

He explained that initially, an underwriting — the process of evaluating and analyzing the risks of insuring the assets — is performed “based on a very detailed application form” that involves crunching 2,000 variables across 20 risk areas.

“A significant risk factor is key management: whether keys are stored in hot, warm, or cold wallets,” Zenkich noted.

Hot, warm, and cold crypto wallets each have different levels of risk. Did you know that until we did it, there was no standard definition of hot vs. warm? Standards development is one way insurance helps emerging markets mature.https://t.co/5OtqpLa8Oh
— Evertas (@Evertas) January 20, 2023

He added that it doesn’t just stop there, as “there are several gradations of hot and warm, each with their own risk profile.”

On April 14, cryptocurrency exchange Bitrue suffered a hot wallet exploit, with attackers stealing nearly $23 million worth of crypto assets. The affected hot wallet held less than 5% of the exchange’s overall funds, and the remaining wallets have “not been compromised," according to the firm.

Zenkich explained that after determining the level of storage risk, the firm will then need to look at thousands of "business, technology, and operational variables,” before being able to work out how much of a premium to charge, stating:

“Once we have the answers to all the applicable questions, we determine what kind of premium we would need to charge to justify taking on the risk.”

That being said, crypto insurance providers are usually unwilling to insure individuals whodon’t hold assets on an exchange — such as through self-custody or other means.

Adrian Przelozny, CEO of the Australian crypto exchange Independent Reserve, said that this is because it “would be very hard” for a customer to prove to the insurance provider they actually lost the crypto and didn’t just take it themselves.

: Crypto hacks are down (for now)
Following a record-setting 2022, which saw USD 3.7 billion in stolen crypto, new research from TRM Labs shows crypto hacks are down 70% in Q1 2023. What's driving the trend and how long will last https://t.co/exxBwJKzjP
— TRM Labs (@trmlabs) May 23, 2023

Przelozny explained that while the provider only insures assets on the exchange platform itself, its “customers have a direct relationship with the insurer,” and “can choose to have 100% insurance coverage,” for a small fee when signing up.

He added that it’s a long insurance contract with many events covered, from hacks to “theft caused by our team.”

Meanwhile, a spokesperson for cryptocurrency exchange Binance told Cointelegraph that its emergency insurance fund, the Secure Asset Fund for Users (SAFU), is managed internally.

“It is a fund that is owned by Binance [that] was established in July 2018 to protect users’ interests,” they said.

“A verified loss sustained by a user from a vulnerability or other deficiency in Binance’s security systems and/or security protocols would be covered by SAFU,” said the spokesperson.

Simon Dixon, CEO of online investment platform BnkToTheFuture, however, believes there are things that traditional insurance providers can learn from their crypto counterparts to improve their practices.

“There is an opportunity to improve on traditional insurance with Smart Contracts and make it more accessible to all which I look forward to seeing grow as an industry, with our sector's usual growing pains.”

Magazine: Hyperbitcoinization is underway, RFK seeks Bitcoin donations and other news: Hodler’s Digest, May 14-20

Proposed Australian exchange licensing could stifle competition: Kraken

November 23, 2021 Coin Telegraph

Adrian Przelozny

Kraken Australia’s Managing Director is concerned that a proposed new licensing regime for crypto exchanges could collapse the vibrancy of the industry down under.

With crypto regulation reportedly set to ramp up in Australia over the next 12 months, Kraken Australia’s Managing Director Jonathon Miller thinks that a strict crypto regime could stifle local competition.

The Senate Committee on Australia as a Technology and Financial Center, led by crypto-friendly Senator Andrew Bragg tabled 12 extensive recommendations for regulation of the digital asset and Fintech industry last month. The proposals included a new licensing regime for crypto exchanges, new laws to govern decentralized autonomous organizations (DAOs), and an overhaul of capital gains tax in decentralized finance (DeFi) to name a few.

In an exclusive interview with Cointelegraph, Miller said it was “yet to be seen” if the proposed regulations would have a positive or negative effect on the local sector moving forward, noting that:

“We've seen other markets where onerous regulatory regimes have come in and you know, you see a collapse of competition, a collapse of the vibrancy that we've got today in Australia.”

“And I hope that doesn't happen because that will be bad for the consumer in the long run,” he added.

Under the proposed market licenses for Australian digital currency exchanges (DCE), local firms would need to meet strict “capital adequacy, auditing, and responsible person” requirements to obtain a license to operate.

Speaking on the matter, Miller drew comparisons with Japan as he argued that the limited number of options on the market due to the government's strict licensing requirements which also negatively impact the local consumer.

“[Kraken has] a markets license in Japan, one of the very few crypto companies available to Japanese users. Even though we're active there and we're really supportive of that market, I don't think that's good for the Japanese people that there are so few opportunities for players in space,” he said.

Caroline Bowler, the CEO of local crypto exchange BTC Markets offered a different take, however, telling Cointelegraph that the incoming crypto regime in Australia will “enhance and enable innovation.”

“The proposal, I feel, had a lot of very forward-looking points of view in it. The talk about DAO’s in particular, that would be extremely innovative from a regulatory point of view for any country, any jurisdiction, anywhere in the world,” she said.

Bowler stated that the “single biggest roadblock” for the firm when exploring expansion opportunities for compliant services and products last year was the lack of crypto-focused regulation in Australia:

“That was causing issues across the business and issues for us to expand and issues for our clients and causing a hesitancy amongst people coming in. We couldn't offer the full range of what we wanted to offer.”

“And the licensing regime, as it currently existed for traditional markets, was a shoe that didn't fit. We couldn't squeeze in,” she added.

Adrian Przelozny, the CEO of Australian and Singapore-based crypto exchange Independent Reserve (IR) echoed similar sentiments to Bowler, noting that the “upside of regulation far outweighs any risks.”

IR became the first Australian crypto exchange to obtain a Major Payment Institution License in Singapore at the start of October. Przelozny suggested that the firm’s registration under the Monetary Authority of Singapore’s licensing regime has significantly improved the IR’s legitimacy in the eyes of its potential partners:

“I can tell you that being in a licensed jurisdiction is much better than being in an unlicensed jurisdiction. And this is because it really changes the conversations that we have with the partners that we get to work with.”

Przelozny highlighted that the “biggest challenge” for crypto firms in Australia is being able to secure good banking relations, with de-banking being a key issue in the local crypto climate. IR’s CEO stated that this may nolonger be an issue once local companies can acquire the appropriate licensing.

“Over in Singapore, as soon as we got the license, we found the banking conversations completely changed and now the banks are approaching us to be their customer,” he said.

Adrian Przelozny