Cryptocurrency exchange operators in South Korea can now be insured against hacks through an insurance firm that offers cyber-insurance to cover cryptocurrency losses.
Crypto-Insured
A typical cyber-insurance product compensates for the loss of personal information. However, a South Korean firm is taking the concept a step further by offering an insurance policy for money lost by cryptocurrency exchanges.
The ‘hack’ cover is from a local insurance firm known as ‘Hanwha Insurance’, and it will provide domestic exchanges with an added layer of protection.
A representative from Hanwha Insurance said: “We plan to start negotiations with individual exchanges for insurance starting next month.” He further added that “It is not a product that has to be compulsory, but it can be outlined if we discuss how much demand there will be. Even if the exchange wants to join, it will require as much coordination as the insurance and reinsurance companies need to meet in order to get insurance.”
A report from Asia Time further notes that some of the most prominent exchanges in South Korea and the world have been insured, including Bithumb for USD $5.3 million, Upbit for USD $4.5 million, Coinone and Korbit for USD $2.7 million.
The cryptocurrency industry is no stranger to theft. The hacking of exchanges and wallets has become an area of concern for governments, industries, and consumers. This has invariably led to several innovations in crypto-storage and security, as well as turning the space into a ‘high-risk’ area.
Reluctance
In 2018 alone, losses due to crypto-theft have surpassed USD $1.73 billion, more than half of the total recorded losses since 2011.
On the 20th of June 2018, Bithumb, the sixth largest exchange in the world and South Korea’s largest exchange, announced that it suffered a costly USD $31 billion hack. At that time the exchange ceased all cryptocurrency and fiat withdrawals, customers were also told not to deposit any cryptocurrencies due to Bithumb moving all its assets into cold storage.
A week later, with the help of other crypto-exchanges Bithumb had managed to recover just over a third (USD $14 million) of its losses. However, deposit and withdrawal services were reopened on August 4th, 2018.
Earlier in the same month that Bithumb was hacked, a lesser-known South Korean exchange CoinRail (90th in the world), also fell victim to a cyber attack which saw 30% of its traded coins stolen.
After the Bithumb hack, insurers were skeptical of cryptocurrency exchanges. One insurance industry official told Business Korea on June 25th, “The Korea Blockchain Association emphasized a stronger internal control system and security at the earlier sessions. But we cannot trust it as even the largest cryptocurrency exchange in South Korea was exposed to cyber attacks.”
The Korea Blockchain Association had begun discussions in June 2018 with another insurance firm as well as Hanwha to see how exchanges could take out a crypto policy. According to the association it has been in negotiating with insurers since April 2018.
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