The FDIC retracted FIL-16-2022 in March, paving the way for FDIC-supervised agencies to engage in cryptocurrency activities. These agencies previously had to notify the FDIC and receive approval for activities involved in cryptography. This new policy allows banks to “enforce acceptable crypto-related activities without prior FDIC approval.” While institutions are still needed to manage related risks with crypto, expanding digital currency investments and usage also poses new risks.
Traditional money is protected by banks and financial institutions, but cryptocurrencies operate in decentralized systems. This means security and insurance coverage can be complicated. If someone hacks into your digital wallet and steals your assets, your insurance policy may not cover your losses.
The cryptocurrency market is also a frequent target for cybercrime. According to TRM Labs, the US saw a 17% increase in crypto-related hacking in 2024, with nearly $800 million in stolen assets.
Cryptocurrency policy is an ongoing work
Determining the monetary value of cryptocurrency losses is the most difficult part of guaranteeing these currencies. Cryptocurrencies can become volatile because they are not supported by the government or linked to physical assets. And insurers generally don’t like to take on risk unless they know exactly what level of risk they are undertaking.
“A dollar is always worth every dollar, but the value of cryptocurrency fluctuates dramatically,” says Sean C. Griffin, a lawyer who specializes in cyber insurance. “You buy a lot of dollars on Monday and twice as much on Friday.
Griffin identifies another risk that resonates with someone who has forgotten their password. “We’ve seen that if someone loses their Bitcoin account key, the policy refunded the price they purchased, not the current value.”
Due to the unstable price changes of cryptocurrency, we recommend considering having “agreed value” restrictions when available. This means carriers and determines in advance how much you pay your bill in the event of a total loss. This is a settlement technique that is often used in real estate where value can change quickly, such as antique cars and artwork.
Comprehensive policies should also include support from the Cybersecurity Billing Team to investigate and assist in your losses.
Can I buy cryptocurrency insurance?
Cryptocurrency insurance focuses on risks inherent in digital assets, such as cyberattacks, fraud, and loss of private keys. Most existing cryptocurrency insurance is designed for institutions such as exchanges, not individual investors. While some policies may cover exchange hacks and system failures, individual consumer coverage options are still rare.
Griffin says he’s seen a lot of lawsuits seeking crypto coverage, but he hasn’t seen any policies that cover it yet. That said, there are several new options for each individual crypto holder. These include:
- Specie Insurance: This professional coverage protects high value assets such as gold, gems, and cryptocurrencies stored in cold wallets. If your private key is physically damaged or stolen, Specie Insurance may help you recover from your losses.
- Standalone Crypto Policy: Some insurance providers currently offer limited coverage for cryptocurrencies stored in online wallets, providing financial protection against theft and cyberattacks.
- Coverage of excess and surplus (E&S) lines: Excess and surplus market specialist insurance companies may offer custom crypto insurance, which can be costly.
It is important to note that even these policies generally exclude losses due to market fluctuations, fraudulent transactions, or misplaced passwords.
Homeowner Insurance and Cryptocurrency
A homeowner’s insurance policy covers your personal property or content, but that doesn’t mean that your code is protected. Most standard policies classify money including cash, banknotes and coins – Coverage C: Personal Property. Coverage C usually limits money, bank notes, coins and smart cards collections to $300 per loss. Similarly, commercial crime insurance does not cover cryptocurrency exposure, as these policies were designed to address valuable physical assets such as cash, securities and precious metals.
Many policies specifically exclude virtual, electronic, or cryptocurrency altogether, so assuming that the policy covers stolen cryptography, it could be empty-handed after a loss.
What about cyber insurance?
It is becoming increasingly common for home insurance companies to provide identity theft or cyber insurance as an approval option. This additional premium, or in some cases a free service – allows you to file a claim for costs related to certain online risks, such as data breach, fraud, or liability claims. However, it rarely covers actual losses or transfers of funds. This means that if your assets are stolen by hacking, they may not cover cryptocurrency theft.
Conclusion: Is cryptocurrency insurance worth it?
As cryptocurrencies become more mainstream, the need for insurance coverage is increasing. However, the currencies fundamentals in decentralization make guarantees complicated. The insurance industry is slow to adapt, and most insurance offers limited protection. If you are investing in cryptocurrency, take proactive security measures, such as using cold storage, the possibility of two-factor authentication, and maintaining a backup copy of your private key.
Specialized cryptocurrency insurance contracts are emerging, but they are often expensive and do not cover market losses.
For now, Griffin says that best protection for digital assets remains a strong cybersecurity practice and could be a secure storage method. “To be honest, all that insured actually can do is to cover the costs paid for the encryption.
