Some insurance brands have already dipped a toe into the crypto asset sector. It’s uncharted territory in many ways, as the value of a piece of code somewhere in the Cloud is always hard to define accurately. The potential for fraud, ID impersonation, or ransomware effectively locking people or companies out of their crypto asset accounts, is something the industry needs to develop too.
Chander Agnihotri, legal director at Clyde & Co, comments on the UK government’s final proposals on the introduction of additional regulation for the crypto-industry:
“Earlier this week, the UK government set out its final proposals regarding the introduction of additional regulation for the crypto-industry. This is motivated by the government’s clear intention to establish the UK as a global crypto hub and to attract businesses within this burgeoning sector to our shores.
In the wake of instances such as the FTX scandal, the need for regulation has never been clearer. The sector has two competing images, on one hand a highly innovative technology that has exciting and vast implications for the future, and on the other a volatile industry that is often plagued by fraud and deployed for criminal means.
For established businesses to become comfortable with crypto and for the industry to thrive, the first of these images must eclipse the latter and for this, regulation is essential. Regulation should not only offer market stability but should also safeguard against bad actors.
Owing to market volatility and the paucity of regulation, insurers have been cautious about offering cover within the sector despite this being one of the few untapped markets. This has caused a number of crypto-businesses to opt for captive / self-insurance solutions, an option only available to well-funded entities. As regulation increases and market confidence improves, many insurers are expected to rethink this position.”