Insuring the Future of Crypto: Addressing the Growing Need for Investor Protection in the Digital Asset Market

February 13, 2023

By Murtuza Merchant

The crypto insurance market is shaping up to be a critical aspect of the cryptocurrency industry. With increasing adoption, comes a growing threat of crimes against investors. 

Sadly, only a tiny fraction of investors are insured against scams and theft, leaving them vulnerable. This presents an opportunity for businesses to tap into the crypto insurance market and cater to retail investors, by offering a safety net in the crypto space. 

The latest technology, such as smart contracts, multi-sig wallets, faceID, etc., can help reduce risks for investors and increase the profitability of the business.

Crypto Insurance Sector Can See Tremendous Growth

The crypto insurance market is poised for significant growth, with an estimated market size of nearly $40 billion by 2030, from today’s $500 million valuation. This growth is expected to be a staggering 72.4% CAGR in just 8 years. 

To put this into perspective, the bitcoin market, valued at $20.4 billion, is expected to grow to $130 billion during the same period (26.2% CAGR). With the addition of other digital assets, the crypto insurance market only gets more attractive.

Why Is Crypto Insurance Important?

Every transaction in the cryptocurrency space presents a risk to the investor. With a higher volume of transactions, comes a higher risk of encountering problems. 

This is where crypto insurance comes into play, to help manage these risks. Different levels of risk require different insurance products, but few companies are offering such services today.

According to the Chainalysis Crime Report, there were $15.8 trillion in crypto transactions last year, a five-fold increase from 2020. On the other hand, $14 billion was sent to illicit addresses, primarily from scams, stolen funds, ransomware, or other illegal activities – almost double the amount from 2020. 

This puts thousands of investors at risk of losing their funds or being scammed, without any insurance. It is time for the crypto insurance market to step in and address the real needs of cryptocurrency holders.

Investors in traditional markets have insurance options, such as FDIC in the US, FSCS in the UK, and FDGE in Spain, so why not have insurance for crypto investors as well? The lack of a safety net deters many potential investors from entering the cryptocurrency market. 

Tailored insurance products can help mitigate these fears and make investing in crypto more attractive. Two insurance products that could be offered include insurance for customers’ cold/hot wallets and insurance against scams and theft.

What Should Crypto Insurance Focus on?

A crypto insurance company should first focus on creating an infrastructure to reduce customer risks. 

This can be achieved through measures such as multi-signature confirmation for large transactions, face ID for key retrieval, a browser extension to warn customers about shady sites, and simulated attacks to educate customers on how to improve their security measures. By reducing customer risks, the company can increase its profit margins.

A SWOT analysis of the Spanish market for a crypto insurance company would show that it is a young industry with untapped potential. 

Getting involved with the local crypto community, leveraging startup experience, and utilizing existing technology can be seen as strengths. On the other hand, being specialized in crypto insurance may not be a strength yet, but it is something that can be learned over time.

About the author

Murtuza Merchant is a senior journalist and an avid followering of blockchain and cryptocurrencies.

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