The growing use of cryptocurrencies has led to a higher demand for insurance coverage for digital currency traders and exchanges. However, recent events have left many in the industry without sufficient protection. Insurance companies have reportedly denied or limited coverage to clients with any involvement with the now-bankrupt crypto exchange FTX.
The collapse of FTX has only amplified these issues, as insurers were already hesitant to underwrite asset and directors and officers (D&O) protection policies for cryptocurrency companies due to the unregulated market and the volatile prices of Bitcoin and other cryptocurrencies.
This lack of insurance coverage poses a significant risk for those in the cryptocurrency industry, as they are vulnerable to substantial financial losses in the event of a cyber-attack or other unforeseen circumstances.
In response to these concerns, insurance market specialists are calling for greater transparency from crypto companies regarding their exposure to FTX. This includes requiring clients to complete a questionnaire detailing any investments in FTX or assets held on the exchange.
In addition to increased transparency, some insurers are also proposing broad policy exclusions for any claims resulting from a potential collapse of the exchange. These exclusions will protect the insurers from financial losses if FTX is unable to meet its financial obligations.
While the impact of the crypto exchange FTX on the crypto industry is uncertain, insurance companies are taking a cautious approach to mitigate potential risks.
By requesting more information from crypto companies and implementing policy exclusions, these insurers hope to protect themselves and their clients from the potential fallout of any instability at FTX or other cryptocurrency exchanges.
If you would like to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, and Instagram.
“Take control of your crypto portfolio with MARKETS PRO, Defi Planet’s suite of analytics tools.”
