Insuring Cryptocurrency: Where Insurers Fear to Tread


By: Alexia Roney

When Janet Yellen, U.S. Treasury Secretary, called Bitcoin “extremely volatile” on February 22, 2021, the market proved her point as the cryptocurrency dropped a sixth of its value the next day. Yet, the cryptocurrency market, now worth nearly a trillion dollars, will continue to draw in the investors. So, is there insurance to minimize those risks?

Not nearly enough.

Barriers to insurance coverage for cryptocurrencies include the volatility of the market, the many differing business models, the complicated technical underpinnings for each cryptocurrency, an ill-defined and uncertain regulatory framework, and a hardening insurance market in the pandemic. Often litigation is necessary to determine what the digital asset is – a currency? a security? property?

Yet, a few insurers, such as XL Catlin and Lloyd’s of London, offer two types of insurance for the commercial market. First, companies and exchanges may obtain theft coverage for cryptocurrency. Such companies are prime targets for hackers because they collectively hold billions of dollars in cryptocurrency.

Second, insurers offer D&O coverage, which is essential for start-ups marketing new cryptocurrency – referred to as initial coin offerings or ICOs – as investments to attract directors, advisors, and investors. The U.S. Security and Exchange Commission considers ICOs securities and aggressively pursues enforcement actions against start-ups, officers, and directors for failing to comply with federal securities law.

Insurance will likely remain difficult to obtain over the near term. Even as the market develops, cryptocurrency readily flows internationally, outside the control or protection of financial institutions and governments. Insurers will hesitate to tread where investors rush.

For more information, please contact Alexia Roney at