Bitcoin is a topic of substantial debate, especially when it comes to recovering financial losses. Mitsui Sumitomo Insurance, a Japanese insurance company, will start offering a new product tailored towards solving this problem. If their plan is successful, Bitcoin users will be able to cover losses and damages suffered from exchange platforms going offline or getting hacked.
Addressing Bitcoin Exchange Insecurity With Insurance
Most cryptocurrency enthusiasts are well aware of how storing funds on an exchange platformm is asking for trouble down the line. Since no one is in full control over their funds, no guarantees are provided to withdraw the money. Moreover, if an exchange were to get hacked – such as Bitfinex earlier this year – there is no way for users to hedge against financial losses.
But if it is up to Mitsui Sumitomo Insurance, those concerns will be a thing of the past very soon. Their soon-to-be-launched insurance product focuses on covering losses and damages suffered at the hand of using Bitcoin exchanges. This new product is created in collaboration with Japanese Bitcoin exchange bitFlyer. As a result, both the exchanges and their customers will be protected for up to 1 billion yen.
Moreover, this insurance product will cover the costs of dealing with issues when they arise. Notifying customers of an incident involving their money is not a fun experience by any means. Especially when the loss of funds includes international clients, the situation can go from bad to worse rather quickly. As we have seen in the Mt. Gox debacle, any non-Japanese customer affected by the theft of Bitcoins had to go through a lengthy process of filing a report.
Insurance premium rates will be calculated based on exchange’s commission revenue structures. High-volume Bitcoin exchanges will be able to secure a higher insurance coverage rate, whereas smaller exchanges can only offer lower plans. But in the end, cryptocurrency users can rest assured their funds is safe, regardless of whether the platform is operational or gets hacked.
While this news is positive for Bitcoin users all over the world, the product will only be rolled out to Japanese companies for the time being. According to Nikkei, similar products exist in other countries, although a global solution is direly needed. Bitcoin is a global currency, and most exchanges serve an international clientele. Security of funds through an insurance product sounds great on paper, but only when it is available to everyone in the world at affordable rates.
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