Independent Reserve is now Australia’s first insured cryptocurrency exchange
Wider use of insurance in cryptocurrency both causes and evidences ongoing shifts in the industry.
Independent Reserve has become Australia's first insured cryptocurrency exchange, with coverage underwritten by one of the world's largest insurance underwriters.
The insurance giant was one of the first to start providing coverage for the digital assets held by cryptocurrency custodians, and now its cover is available in Australia through Independent Reserve.
Like all insurance, Independent Reserve's policy doesn't automatically cover 100% of all crypto for all users. It covers the loss or theft of cryptocurrency from Independent Reserve trading accounts, but does not cover losses resulting from the hacking of individual accounts.
So something like a SIM swapping attack is unlikely to be covered by the insurance, but something like the Bithumb incident or the Cryptopia incident or the CoinCheck incident or the Zaif incident or the BitGrail incident might be covered.
However, that assumes that any of those exchanges would have been able to get coverage in the first place.
As Independent Reserve CEO Adrian Przelozny notes, simply being able to get coverage is an achievement in itself, suggesting a vote of confidence in an exchange's security standards and management of funds.
"The acceptance of this policy by the largest insurer in the world is a vote of confidence in our corporate governance, robust risk management and security protocols and a sign of their commitment to working with only the highest quality partners," Przelozny says.
But needless to say, loss of value resulting from cryptocurrency volatility is not covered.
"Insurance is the next logical step for our exchange in this fast-maturing industry. Our new insurance offering will bring new, meaningful and institutional capital into digital assets that was once sidelined. The policy is an addition to the multiple layers of security Independent Reserve have been using to protect digital assets for 100,000 customers over the past five years," Przelozny says.
Beyond being a logical next step, wider availability of insurance for digital assets can be an especially significant step.
Standardisation of requirements across policies can contribute to the development of cryptocurrency security best practises and the setting of new industry standards, while having access to insurance can mean a much more palatable risk landscape for businesses that want to get involved in the area.
Plus, when crypto insurance starts to be used more widely, you start seeing the almost magical economic effects of risk pooling. Beyond that, coverage for the customer funds kept on exchanges helps pave the way for future crypto custodial services, which can in turn give buyers safer options.
While insurance for high security crypto vaults has been a thing for a while, the introduction of insurance for crypto exchanges goes a step beyond that.
Disclosure: At the time of writing, the author holds ETH.