Adoption of cryptocurrency by large fund managers is being hurt by the difficulty cryptocurrency exchanges and traders located in Asia are having trying to get insurance to protect against hacks and theft. Reuters, citing analysts, reported that obtaining insurance would be a huge step in bringing legitimacy to the cryptocurrency market and enabling the exchanges and Asian traders to lure investment dollars from mainstream fund managers. “Most institutionally-minded crypto firms want to buy proper insurance, and in many cases, getting adequate insurance coverage is a regulatory or legal requirement,” Henri Arslanian, PwC FinTech & crypto leader for Asia, told Reuters. “However, getting such coverage is almost impossible despite their best efforts.” While cryptocurrencies have garnered a lot of interest from all sorts of investors, leading fund managers have shied away from it because there is uncertainty surrounding the regulation of digital tokens and worries about the existing infrastructure for storing and trading cryptocurrency. Regulators have yet to develop policies over how digital tokens trading should work and who can engage in it, reported Reuters. The market hasn’t been helped by hacks of exchanges in recent months and a steep decline in the value of bitcoin, the leading cryptocurrency. Reuters noted the market capitalization of digital tokens now stands at $120 billion, down from more than $800 billion in January when the market cap peaked. An anonymous cryptocurrency broker told Reuters that insurers are having a hard time understanding new technology and that the ones who will offer insurance will keep it limited. “We’ve not yet found an insurer who will offer coverage of a meaningful enough size to make it worthwhile,” he said. While cryptocurrency exchanges and traders are complaining about the lack of insurance, some in the insurance industry said they are already providing coverage for those groups. Reuters pointed to Aon, which said it received around two dozen inquiries in 2018 from exchanges and crypto storage companies that wanted insurance. Thomas Cain, regional director of commercial risk solutions at Aon’s Asian financial services and professions group, told Reuters it’s not hard to insure companies that hold a lot of crypto.
Analysts believe that the inability to insure the cryptocurrency market is a major hindrance in legitimising digital currencies and seeing them enter the mainstream market, according to Reuters. The uncertainty surrounding digital token regulation has led to hesitancy in adoption from leading investors and fund managers, particularly concerning increasing cyber risk awareness and the declining bitcoin value in January 2018. The digital tokens’ market is currently valued at $120bn, down from over $800bn at its peak in recent months.