On Tuesday (February 19th), crypto custody specialist BitGo announced that it was offering for free $100 million of insurance cover for digits assets it holds for clients via its custodial solutions.
BitGo offers two custodial solutions for digital assets:
- Business Wallet: This is a multi-sig hot wallet, or in BitGo's words, "an institutional-grade, multi-signature, multi-coin transactional wallet." BitGo says that "multi-signature, three-key management removes any single point of failure and advanced security configurations ensure that assets are secure as they move in and out of the wallet." This service is provided by BitGo, Inc.
- Custody: This is a cold storage and custody service provided by qualified custodian BitGo Trust Company
The insurance company that is providing this $100 million cover is Lloyd's of London ("Lloyd's" for short). According to BitGo, the cover is for "digital assets where the offline private keys are held 100% by BitGo, Inc. or BitGo Trust Company" in the event of "third-party hacks or theft of private keys," "insider theft by employees of private keys," and "physical loss or damage of private keys." BitGo says that it "has worked for the last year to build the right solution along with its partners, Woodruff-Sawyer & Co. and Paragon International Insurance Brokers Ltd," and that "the team is now working on building a streamlined process to accommodate dedicated limits to individual customers."
As for the "Business Wallet" service, clients will be able to buy through third-part insurance provider Digital Asset Services (regulated by the UK's Financial Conduct Authority) "Theft Insurance" and "Lost Key Cover" (a key recovery service). Lost Key Cover will be "available for purchase either as an annual subscription or when needed." Theft Insurance is "the first of its kind and will enable BitGo clients to get fully regulated specialist insurance for their digital currency holdings."
David Janczewski, the CEO of Digital Asset Services, said:
“We’re delighted to pre-announce the launch of our specialist digital currency insurance and lost key cover. This initial release with BitGo will enable us to bring these ground-breaking products to market with a partner who shares our vision of offering the highest security standards to clients. Our goal is to make digital currency safe and accessible to all by providing total peace of mind for anyone who is currently holding cryptocurrency, or anyone who might be on the outside looking in and just needs that extra bit of reassurance before investing.”
Also, BitGo provides "a comprehensive set of corporate insurance policies including D&O, E&O, and Cyber Theft."
Mike Belshe, the CEO of BitGo, had this to say:
“This is the most complete insurance offering in the industry. It is not always easy for some clients to understand under what circumstances their investments are insured and to what extent their loss would be covered. We are changing that by being more transparent than any other company about the terms of our coverage. Transparency and accuracy is essential for building trust in the market.”
And Nicholas Edwards, Head of Fine Art & Specie, AmTrust at Lloyd's, stated:
“We have been working hard to tailor a bespoke insurance product for BitGo, in this new, rapidly developing and complex sector. Following a thorough review of BitGo’s security and controls we are delighted to have delivered an innovative solution that enables our client to develop and grow its business with confidence and security.”
According to Bloomberg, although "many exchanges that store customer funds, such as Coinbase Inc., do have insurance," unfortunately "those policies typically only cover so-called hot wallets that are Internet-connected and used for immediate trading of customer coins." It also notes that "Lloyd’s-affiliated insurance companies have sold cold-wallet insurance since 2014, but most of the policies issued have had smaller limits, or didn’t cover as much."
The BitGo CEO told Bloomberg in a phone interview:
“It’s a huge thing. We’ve had clients that wanted to see this before we finished their onboarding process. This gives them peace of mind."
Featured Image Courtesy of BitGo, Inc.