Insured Deposits May Soon Come to Bitcoin Exchanges

NEW YORK (InsideBitcoins) – Last week, BitGo announced a partnership with Innovation Insurance Group LLC for the purposes of insuring any bitcoin secured via the company’s multisig storage solutions against possible loss or theft. The new insurance policy protects paying BitGo customers against up to $250,000 in losses, and additional protection can be purchased for a one percent annual fee. Both hot and cold wallets are covered under the unique policy, which has led many to ponder the implications this newly available insurance could have on bitcoin exchanges.
Exchanges need insurance
With all of the hacks and thefts that have taken place in the bitcoin industry over the past few years, one would imagine that traders could be wooed into moving to a new exchange through the promise of insured bitcoin deposits. At this time, the only traditional bitcoin exchanges that offer any sort of insurance on bitcoin deposits are Coinbase Exchange and Coinsetter. Coinbase Exchange has an insurance policy for their hot wallets, while 50% of all Coinsetter deposits are covered through Xapo Vault.
With the recent partnership between Bitstamp and BitGo, it could make sense for Bitstamp deposits to be covered under this new policy. I was able to discuss the new insurance offering with BitGo CEO Will O’Brien via email, but he stated, ‘We are not disclosing which customers have opted into that additional guarantee at this time.’
Although O’Brien was not willing to discuss specific clients, he was able to share his thoughts on the need for insurance at bitcoin exchanges in general:
‘There is lot of demand for additional protection in the exchange market. With the high profile hacks that have occurred over the years, exchanges need to do everything they can to instill confidence that customer funds are safe. By working with BitGo, exchanges get best-in-class security technology and can now benefit from an insurance-backed guarantee.’

This post was published at Inside Bitcoins on Mar 4, 2015.