Cybersecurity firm, Group-IB, recently assessed the level of security and consumer protection provided by large digital asset exchanges.
According to the findings of Group-IB’s research, US-based crypto trading platform, Kraken, is the most secure, while Coincheck, Huobi Pro, and OKEx are the riskiest exchanges.
In order to determine the insurance premiums required to cover cryptoassets held on exchanges, Group-IB and IT platform, CryptoIns, are developing a risk assessment system.
The estimated insurance premiums will be used to create a new digital currency insurance policy - which will take into consideration potential losses due to illegal actions of exchange employees such as insider trading.
Risk Assessment Based On Cyberattacks, Theft
External risk factors including cyberattacks, theft, and other types of fraudulent activities will also be used to calculate insurance premiums and formulate the insurance policy.
At present, CryptoIns is offering insurance coverage to users of over a dozen digital asset exchanges. The level of coverage is determined based on the overall technical security of each exchange, the reliability of their (private) key storage, and how they manage user data.
CryptoIns’ insurance policies also take into consideration whether exchanges require proper know-your-customer (KYC) and anti-money-laundering (AML) checks. A Group-IB representative told Hard Fork:
In the first place, we assess how crypto exchanges deal with crypto and fiat assets: what are the exchanges assets keys’ storage and management procedures. In some cases, with founders’ consent, the assessment includes penetration testing using social engineering methods aimed at the network compromise through the most vulnerable link at any organization – humans.
Large Insurance Firms Help Develop CryptoIns Platform
ASPIS SA, a Switzerland-based provider of “consulting and broking services in reinsurance and insurance” for Europe, Middle East, and Africa, was reportedly involved in the development of the CryptoIns platform.
Selecta Insurance & Reinsurance Company, a Moscow-based provider of insurance, reinsurance, and various other “insurance-based solutions”, handled all insurance coverage requirements for CryptoIns’ platform.
The insurance framework created by Group-IB and CryptoIns classifies digital currency exchanges into four groups - which are based on their level of risk. Exchanges in the first group are considered to be the most secure, while those in the fourth group may not be insurable as they may be too risky for traders.
Insurance premiums are calculated with a flat, or base, rate of “2.5 percent per quarter”, and discounts of up to 50 percent may be offered based on the level of security provided by the exchange.
Kraken Is "The Most Secure" Exchange
Notably, Group-IB told Hard Fork: “According to our estimates, Kraken is the most secure exchange, with 1.25 percent insurance rate.” To insure 1 bitcoin (BTC) on Kraken for 90 days, it costs 0.0125 BTC (appr. $80).
There’s a 1.5 percent insurance premium charged for Coinbase Pro and Bittrex users - which are considered to be fairly secure, and have been classified in the second group (based on the level of security they offer).
Premiums of 1.9 percent are charged for insuring cryptoassets traded on Malta-based Binance, Hong Kong-based Bitfinex, and peer-to-peer exchange Localbitcoins.