Venerable insurers at Lloyds of London have dipped a first toe into cryptocurrency.
A group of wealthy insurers have stepped in to underwrite a policy for digital asset storage firm Kingdom Trust.
The move is notable as a sign cryptocurrency is starting to go mainstream.
Kingdom Trust has taken on cover to protect $12 billion of digital assets from theft and destruction for more than 100,000 customers.
The business is a South Dakota trust with offices in Kentucky, USA.
Hunt for cover started in 2010
Chief executive Matt Jennings admits the company’s hunt for cover has not been an easy task and that the search for an insurer to take on the risk started as long ago as 2010.
“Qualified custody by a regulated, insured financial institution is a top priority and critical hurdle for institutions to invest in the digital asset markets,” said Jennings.
“By adding another trusted specialist like Lloyd’s to our platform, we’re ensuring that current and future clients will have access to a highly-secure, complete safekeeping solution tailored to meet the challenges of institutional finance.”
London-based Lloyds, the world’s largest insurance underwriter, has not made any comment on the deal, and Jennings refused to give any details of the insurers.
He did add that Kingdom Trust paid less than expected for the cover after carefully explaining that their digital assets were kept in cold storage away from any live networks to reduce the risk of a hack.
Digital assets kept in cold storage
Digital cold storage means cryptocurrencies are kept on servers offline.
Most hacks are from hot storage – which allows the crooks to access servers remotely through an internet connection.
Many exchanges do not have insurance and go bust after a hack, leaving investors exposed and with little chance of reclaiming their money.
Although regulated businesses like Kingdom Trust can hold digital assets for institutional and retail investors, many are shunned by traditional investment firms and in situations due to the regular reporting of hacks that have seen crooks drain cryptocurrencies worth millions of dollars from exchanges and electronic storage.
Kingdom Trust warehouses more than 30 digital assets, including Bitcoin, Ethereum, Litecoin, Ripple and Zcash with facilities for more cryptocurrencies on the way, says the company.