Lloyds of London breaks into crypto storage insurance

Posted: 29 August 2018 7:59 pm
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Reliable insurance solutions are an essential part of any growing industry's diet.

Lloyds of London is one of the biggest names in insurance, while Kingdom Trust is a less-known but still significant name in the cryptocurrency space, as an alternative asset custodian with over $12 billion in custody, from over 100,000 clients.

It has now managed to secure insurance for its held cryptocurrencies from Lloyds of London, via broker SDBIC. Reliable custody has been a major hurdle for cryptocurrency adoption, and insurance in particular has been something of a hurdle within that hurdle.

The growing number of digital asset insurance solutions is probably one of the least sexy but most important signals of growing cryptocurrency adoption and usability.

What's so cool about insurance?

Getting a reliable custody solution is one of the main obstacles for institutions that want to dabble in crypto but don't. And a lack of reliable insurance solutions is one of the main obstacles for custodians that want to solve this problem.

You can probably see why adding Lloyds to the mix might be a noteworthy step forward for cryptocurrency usability and adoption.

Beyond that, widely available digital asset insurance makes it much easier to price the risks associated with doing crypto. In this way, insurance availability can be seen as a dividing line between the risk-taking early adopters and the more prudent early adopters. With a hard price tag on the risks associated with holding digital currency (the cost of the insurance premium and complying with all its conditions), it's suddenly much more possible to build a business case around crypto. Plus, many previously unjustifiable business cases and applications will become justifiable with the addition of reliable insurance.

Learning about and complying with cybersecurity best practice is also a key obstacle for the crypto-curious businesses. But as they say, one person's laborious terms and conditions are another person's treasure. A growing field of digital asset insurance policies can go a long way towards laying out crypto cybersecurity best practice.

But these are more in the nature of happy side effects. In the longer run, it's also worth considering the impact of insurance policies doing exactly what they're intended to do, and serving as practical tools for pooling risk.

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When it was first invented, insurance was a revolutionary piece of financial technology precisely because it made possible what was previously impossible or inadvisable. Imagine trying to convince investors to fund a trading voyage to the New World when there's a 50% chance of losing everything and a 50% chance of getting double your money back. Add insurance to the mix though, and the pitch functionally shifts to a 0% chance of losing everything, a 50% chance of breaking even and a 50% chance of making a bit less than double your money back.

That's the kind of thing it can do for cryptocurrency, and why it's such an important part of the diet of any growing industry.

Disclaimer: You should always consult a qualified financial adviser before funding a voyage to the new world. Shipments of valuable spices and exotic animal hides may not be suitable for everyone's financial needs. Risks include but are not limited to exotic diseases, cabin fever and inadvertently perpetuating several centuries of imperialism.

Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VET, XLM, BTC, ADA

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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