Money, religion and love are all abstract concepts. They only have a value when enough people believe in them, which is one reason why the adoption of banknotes – or promissory notes as the fledgling Bank of England called them back in the late 1690s – really took quite a while to catch on with the public, compared to the thousand year history of gold and silver coins that preceded them. So what if we told you that crypto assets, virtually traded online, may well be replacing Sterling one day?
It isn’t as unlikely as you think because the abolition of cash notes and coins is already well underway in many EU countries, and the recent Corona pandemic has boosted the popularity of cashless, literally contactless, payment. People are scared to touch money and that may yet lead us down the road of virtual money, tokens, e-vouchers and more. That road may well be rocky, as recession bites hard over the next three years, but if blockchain backed assets are to win investor trust, they may require a back-up plan. That’s where insurance kicks in.
Evertas, the world’s first cryptoasset insurance company, says the lack of a robust insurance market is hampering the adoption of cryptoassets and blockchain infrastructure. It warns this is limiting mainstream adoption and regulatory acceptance of cryptoassets and blockchain infrastructure.
Figures released today by Evertas reveal that last year just over half (55%) of insurance executives it interviewed believed companies were holding back on developing blockchain initiatives and crypto assets because they couldn’t insure their activities here effectively. Only one in five (20%) of those interviewed disagreed with this view.
Furthermore, 87% of insurance executives interviewed said they felt directors and senior executives are at risk of being sued if the organisations they work for suffer losses or thefts linked to their blockchain and cryptoasset activity, and they didn’t /don’t have adequate insurance in place.
When asked how effective they think organisations are in assessing the risks posed to their crypto asset storage and blockchain systems, only 20% of insurance executives believe they are ‘effective’. This helps explain why 35% of insurance executives interviewed said they thought there was a ‘high’ chance of cryptoasset or blockchain related insurance claims being rejected because the risks involved were not properly assessed or recorded when insurance was taken out.
Raymond Zenkich, President and COO, Evertas said: “Cryptoassets are increasingly becoming mainstream. This trend will be further fuelled by more traditional and illiquid assets being tokenized, making it easier to trade and invest in them. There is increased use of smart contracts for owners and investors in these assets to interact with counterparties, and increased acceptance of blockchain as core infrastructure across industries to record ownership, provide an audit trail, and unlock completely different business processes and applications. However, for this market to really reach its full potential, it must be supported by a viable insurance market.
“This is an exciting business opportunity for the insurance industry. Clients will increasingly expect them to understand the risks associated with cryptoassets and blockchain, and to provide them with relevant cover.