Insurance to Cover Hacks, Theft and Loss of Keys
According to a statement released on Feb. 19, Bitgo, which provides custodial services for more than $2 billion in digital assets, said its business wallet customers will now be able to buy theft insurance and a key recovery service called Lost Key Cover. This will be done through Digital Asset Services, an insurance provider overseen by the Financial Conduct Authority, the U.K. financial services regulator. The key recovery service will be available for purchase either as an annual subscription or when needed, the company said.
Custodial assets held completely by either Bitgo, Inc. or Bitgo Trust Company are insured for up to $100 million through insurance group Lloyd’s. The assets will be covered for third-party hacks, physical loss or damage of private keys, insider theft by employees and other hazards. At the end of 2017, Lloyd’s had about $44 billion in gross written premiums. The insurer has a presence in nearly 200 countries and is one of the world’s largest insurance and reinsurance marketplaces.
Whereas traditional bank deposits are insured up to a certain threshold, cryptocurrency deposits generally are not, or only to a limited extent, such as exchanges insuring funds kept on their hot wallets, but not in offline cold storage. The Quadrigacx saga, in which the crypto exchange’s founder died with keys to $145 million worth of cryptocurrency, underscores the need for insurance protection. When CEO Gerald Cotten suddenly died in India in December, he apparently took with him the passwords to a multi-million-dollar fortune belonging to investors, which neither his work colleagues, court nor his wife can locate.
Commenting on the Bitgo deal, Nicholas Edwards, an official with Lloyd’s said: “We have been working hard to tailor a bespoke insurance product for Bitgo in this new, rapidly developing and complex sector. Following a thorough review of Bitgo’s security and controls we are delighted to have delivered an innovative solution that enables our client to develop and grow its business with confidence and security.”
San Francisco-based Bitgo claims to process 15 percent of all onchain global bitcoin transactions and $15 billion per month across all cryptocurrencies. The company is backed by the likes of Craft Ventures, Galaxy Digital Ventures, Goldman Sachs, Redpoint Ventures, and Valor Equity Partners.