Insurance for trading exchange

[badykvik]

A lot of trading exchanges have been hacked and users funds stolen leading to the closure of such an exchange, following the recent hack of the binance and 7000 btc stolen by hackers and the effect of such on btc markets, i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

[RapTarX]

They already do have fund for backing these stuff up. Not only Binance, I believe most of the exchanges have a separate fund for facing unnecessary stuff like this. Business too follow the same strategy for avoiding unknown risk in the future.

[NeuroticFish]

They already do have fund for backing these stuff up. Not only Binance, I believe most of the exchanges have a separate fund for facing unnecessary stuff like this. Business too follow the same strategy for avoiding unknown risk in the future.

There's a huge difference between keeping a separate fund and having an insurance.
A separate fund means the exchange will pay all(*) the missing money.
Insurance means the insurer pays for all(*) the missing money.
(*) It's actually not all the money, the upper limit is the size of the fund or the size of what the insurer covers.

However, this may be the best (or maybe the only available) solution. Let's read more:

i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

First of all, there may be few (if any!) insurers that have the knowledge and the willingness to insure a cryptocurrency exchange. It's quite a complex business...
If the number of insurers is 0, clearly insurance cannot be done. If the number of insurers is small, the insurance may be expensive. If the insurance is expensive, an exchange that plans to stay on market for many years may find the fund @RapTarX mentioned be a cheaper option.

And there's something else: cryptocurrency exchanges may not like 3rd party audit (which and insurer may require) since exchanges probably do things that they shouldn't. One example is the new wash trading accusations against Binance.


So @RapTarX answer is not bad, just insufficiently explained.

[Questat]

That is not an insurance for me, lucky they have the funds to cover the lost funds, what if it's higher? or what if next time they will be hack again?
If that happens they will run out of SAFU funds, a good insurance should be catered by the third party and all funds has to be insured.

[icobest360]

I think this is terrible, the perpetrators of crime will damage the scope of crypto ... this cannot be tolerated, all exchanges or businesses must immediately fix their security systems.

[monalia]

A lot of trading exchanges have been hacked and users funds stolen leading to the closure of such an exchange, following the recent hack of the binance and 7000 btc stolen by hackers and the effect of such on btc markets, i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

Yes there are some insurance based projects got success already. This kind of trading site may use such sites to insure them.

But the Insurance project should be wealthier than the trading else they cannot help them while they face the lose more over these insurance business people really worst to show their interest where is high risk.

[bittraffic]

Binance had i covered already. I don't know if that 7000BTC affected the market actually but BTC somehow rises instead. Exchanges offering insurance may not be entertained as security can be challenging at every turn. They can assure you security but the hackers are always on the look out for vulnerability. The insurance can just make the exchange go bankrupt in the end so just keep in mind that exchanges are not meant for storing of the coins.

[batang_bitcoin]

It will give security and assurance to the exchanges if something the same happens in the future. But as pointed out by Neuroticfish, not every insurance company knows everything about cryptocurrency. They are likely to deny an exchange application due to the potential incidents that's connected to crypto. I guess they are all aware of hacks and it will give them a red flag if they'll try to continue that. Otherwise, you don't have to worry as mentioned, they have a separate fund for that.

[ShowOff]

A lot of trading exchanges have been hacked and users funds stolen leading to the closure of such an exchange, following the recent hack of the binance and 7000 btc stolen by hackers and the effect of such on btc markets, i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

Not really know about they have insurance or not, but like what people said. Centralized exchange means we not have control with our funds and that is why some people not really agree to trade in centralized exchange.

[jrrsparkles]

A lot of trading exchanges have been hacked and users funds stolen leading to the closure of such an exchange, following the recent hack of the binance and 7000 btc stolen by hackers and the effect of such on btc markets, i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

As far I know there is no insurance company will cover the hacks of exchanges because chances of insurance scams are high if this made possible by insiders so for crypto currency no insurance company will cover the lost funds,but binance already said they will return the lost amount which might come from their hands.

[bering]

Insurance should be there is basic law to protects consumers funds and if there is no basic law regarding it i think it's very hard to the consumers get insurance especially for crypto exchange when some countries still debated the legality of cryptocurrency i think this will be hard to do so

[badykvik]

This issue really goes beyond having a separate funds if I may intercept, the funds kept separately could have been used for better thing rather than using it to fill the vacuum left behind by theft.

I look forward to see an insurance company coming up to offer policy to cryptosystem, I feel this shall bring about more security and safety of funds.

[NeuroticFish]

I look forward to see an insurance company coming up to offer policy to cryptosystem, I feel this shall bring about more security and safety of funds.

The problem is that we probably need *many* insurance companies to come, not only one. If it's only one, if it's no competition, they will ask unreasonably high amounts of money (probably fiat) for the insurances.

[DavidMott]

I agree 100%. Banks have insurance policies and some exchanges have a lot of similarities so they should also offer insurance. Coinbase for instance state that if you are a United States resident, your Coinbase USD Wallet is covered by FDIC insurance, up to a maximum of $250,000 which shows that although Coinbase has a lot of pros and cons, it understands the need for insurance and more exchanges should follow by example and work on improving the policies they may already have in place.

[VanDeinsberg12]

They already do have fund for backing these stuff up. Not only Binance, I believe most of the exchanges have a separate fund for facing unnecessary stuff like this. Business too follow the same strategy for avoiding unknown risk in the future.

It looks very wrong for me, how much reserved funds depend on the how much revenue that acquired by exchange itself. Only major exchange site big revenue can do that. have you seen cryptopia? it can become the best example how the medium or lower tier exchange site doesn't have any insurance or reserved funds to backed the trader's amount that already sent to the hot wallet on that exchange site.

[slaman29]

A lot of trading exchanges have been hacked and users funds stolen leading to the closure of such an exchange, following the recent hack of the binance and 7000 btc stolen by hackers and the effect of such on btc markets, i think the trading  exchange should consider an insurance policy to cover loss in case of funds theft.
Do you think this idea with work in the cryptocurrency business?

This is already done in Japan since they introduced cryptocurrency license for exchanges. All exchanges must get insurance from an approved insurer, to insure deposits made by customers. Just like in a real bank in most countries. IF anything happens, insurance gets paid, and customers receive back the money. I understand that it has worked but it results in high premiums from the insurance, which is passed on as costs/fees to the customers.

[Crypto Girl]

If ever there will be this kind of insurance that will probably expensive because of the high risk thus whoever who will avail this isn't just an ordinary shitty exchange.

However, as far as I know, only the fiat base are insured in a certain exchange. And ao far, there are 4 crypto exchange sites are currently insured such as;

[1] Coinbase
[2] Circle
[3] Xapo
[4] Gemini

You can see the full article here.
https://flagshipcrypto.com/which-cryptocurrency-exchanges-are-insured/

[EdenHazard]

Insurance should be there is basic law to protects consumers funds and if there is no basic law regarding it i think it's very hard to the consumers get insurance especially for crypto exchange when some countries still debated the legality of cryptocurrency i think this will be hard to do so

Surely this thing has should be done bay some companies who able to do it, but in the current situation I'll bet there is no company who able to make it happen. There is many problem that will be faced by them, government's regulation, hacker factor and many thing that will make a company will think a thousand of time to do it. But, I'll believe if there is an exchange itself who become an insurer however this thing should be owned by all exchanges.

[Caladonian]

That is not an insurance for me, lucky they have the funds to cover the lost funds, what if it's higher? or what if next time they will be hack again?
If that happens they will run out of SAFU funds, a good insurance should be catered by the third party and all funds has to be insured.

That's much better since they are also owning the funds what if there's another hacked that happened and the balance is not enough to cover the losses, it's better to have third party insurance company who will then caters the service, from that point of view the traders and investors might have an extra
confidence knowing that they are  still guarantee that the funds or part of the funds will be recover in anyhow.

[bittraffic]

Insurance should be there is basic law to protects consumers funds and if there is no basic law regarding it i think it's very hard to the consumers get insurance especially for crypto exchange when some countries still debated the legality of cryptocurrency i think this will be hard to do so

Surely this thing has should be done bay some companies who able to do it, but in the current situation I'll bet there is no company who able to make it happen. There is many problem that will be faced by them, government's regulation, hacker factor and many thing that will make a company will think a thousand of time to do it. But, I'll believe if there is an exchange itself who become an insurer however this thing should be owned by all exchanges.

Unfortunately there is no exchanges who does that. Its because they know they can not guarantee the safety of the funds even when they keep the promise of having unhackable platform.  They know its not possible. Look what happen to binance, almost everyone see this exchange to be the most credible, and must be protected well but look they still encounter hacking. Though the hack just took few and they instantly being dealt and they also took responsibility to the funds taken.