Cryptocurrency storage firm Kingdom Trust obtains insurance through Lloyd’sPosted On: Aug. 28, 2018 9:33 AM CST
(Reuters) — Kingdom Trust Co., a company that stores digital currency for investors, has secured insurance coverage through Lloyd’s of London to protect against theft and destruction of those assets, the company said Tuesday.
The move by Kingdom Trust, which has $12 billion in assets, is the latest example of a once-reticent insurance industry stepping up to offer protection to companies that store cryptocurrency, a volatile and loosely regulated, but rapidly growing, business.
Kingdom Trust, which has offices in Kentucky and is regulated as a trust company by South Dakota, has been looking for insurance since it launched in 2010 but more actively pursued coverage during the past year, said CEO Matt Jennings.
“From the very beginning we saw insurance as a key factor to bring institutional investors into the marketplace,” Mr. Jennings said in an interview.
A spokesman for Lloyd’s, the world’s largest insurance marketplace, declined to comment.
The move comes as the nascent cryptocurrency industry looks to attract more mainstream investors, the majority of which have steered clear so far because of concerns about lack of traditional safeguards. Large custodian banks do not yet handle crypto assets, and brand-name auditors are seldom disclosed as being involved with companies in the space.
Kingdom Trust says it is qualified under U.S. financial regulations to hold assets on behalf of investment advisers, securities brokers and retirement plans, according to its website.
Some insurance companies have been reticent to publicly disclose that they are covering digital currency businesses, an industry in which investors have lost billions from dozens of cryptocurrency hacks, technical errors and fraud. Many hacked exchanges later shuttered.
The young cryptocurrency industry also lacks troves of data that insurers usually rely on in designing and pricing coverage.
Mr. Jennings declined to comment on the identity of the insurer that underwrote Kingdom Trust’s coverage through the Lloyd’s marketplace or the policy’s cost and specific terms.
But Kingdom Trust received a “drastic discount” because of its technology, a type of “cold storage” in which digital coins are stored offline, Mr. Jennings said.
Most insurers in the cryptocurrency market avoid coverage for coins kept online, or in “hot storage,” because of high risk of hacking and will only cover offline “cold storage,” which is also generally preferred by cryptocurrency companies.
Kingdom Trust provides storage services for over 30 digital assets, including bitcoin, ethereum, litecoin, ripple and ZCash, the company said.