Coinbase reveals crypto insurance coverage up to $255M for hot wallets

Cryptocurrency exchange Coinbase has announced the details of insurance coverage for the crypto holdings in its hot wallets.

Hot wallets, one of the most popular ways of storing digital currencies, are online wallets which make them vulnerable to hacks.

In a blog post dated April 03, Philip Martin, Coinbase’s Chief Information Security Officer (CISO), said:

“We currently hold a hot wallet policy with a $255 million limit placed by Lloyd’s registered broker Aon and sourced from a global group of US and UK insurance companies, including certain Lloyd’s of London syndicates.”

Coinbase told CoinDesk that it holds less than 2 percent of customers’ assets in hot wallets and the remaining 98 percent are held in cold storage – offline wallets which are less prone to attacks.

Noting the confusion and misinformation in the crypto space regarding insurance coverage, Martin said:

“Companies should focus on insurance for value in flight. This means that exchanges and wallets should have sufficient Crime coverage to fully cover their hot wallets (including enough buffer to handle asset price spikes).”

“Companies may insure cold assets, but it should be on a per-customer basis.”

Martin said that the crypto insurance marketplace has matured significantly since 2013, but still, a lot needs to be done. He added that Coinbase is working with regulators and insurers to address each of these areas with innovative offerings.

Importantly, he noted that insurance policies are denominated in fiat but the assets are in crypto, meaning that companies could find it difficult to grow insurance policy limits according to the rise in asset prices in bull markets.

“Insurers need to hold digital assets in order to offer policy limits denominated in cryptocurrency to avoid differences in valuation,” Martin added.

Also, as policies are generally written to exchanges or custodians, not directly to cryptocurrency owners, he emphasized, “We need a world where the ultimate owners of cryptocurrency are able to directly insure their assets stored with trustworthy, well-reviewed, transparent service providers.”