Can You Insure Bitcoin? Here's What You Need to Know

Exchanges and wallets offer limited protection to users. And now there's an option if you're looking to purchase personal coverage.



Investors who own conventional securities, like stocks or bonds, can rely on a level of protective regulation and insurance backing, either through the US government or private policies. However, investors in cryptocurrency don't have the same protections. 

While there's been demand for cryptocurrency insurance to cover everything from deposits to theft, the primary concern is underwriting risks. Major insurance companies don't feel they can accurately assess risk factors due to a lack of cohesive rules and regulation in the crypto insurance industry. Though newer insurers are diving in headfirst, others are merely dipping their toes to test the temperature. 

Given this level of unpredictability in a developing industry, how do you know if your cryptocurrency is safeguarded? And if it isn't, can you insure it? Here's everything you need to know about the new world of cryptocurrency insurance. 

Is my cryptocurrency insured by the US government?

No. The federal government provides insurance for cash and deposits of conventional securities, like stocks and bonds, but not cryptocurrency assets -- at least not yet.

An independent agency of the federal government, the Federal Deposit Insurance Corporation, generally insures up to $250,000 per person, per bank. It covers all checking accounts, savings accounts, money market deposit accounts and certificates of deposit. It currently doesn't cover cryptocurrency. 

However, the FDIC is considering it. In an initiative called the Crypto-Asset Policy Sprint, the FDIC has partnered with the Federal Reserve and the Office of the Comptroller to study cryptocurrency and coordinate "policies for how and under what circumstances banks can engage in activities involving crypto assets," according to FDIC Chairman Jelena McWilliams. However, we don't know how long this process will take or if the FDIC will decide to jump into the space at all. 

Insurance on deposits at brokerage accounts for the purpose of purchasing securities currently falls under the Securities Investor Protection Corporation. Representatives from both the SIPC and the FDIC confirmed that neither currently insures crypto assets. 

That means there's no federal protection for your cryptocurrency. As far as the government is concerned, you're on your own.

Does private insurance exist for cryptocurrency?

Yes, but it's still a nascent industry, and protection is extremely limited. "Most crypto assets are not currently covered by insurance, and that's due to the relative immaturity of the cryptocurrency market," said Brian O'Connell, an insurance analyst at Insurance Quotes. 

The types of private crypto insurance that exist today are not currently targeted for consumers, but are mainly bought by exchanges and crypto wallets. The coverage includes crime and theft, custodial insurance coverage and business insurance, though there are more types in development, according to O'Connell. The future of crypto insurance could include decentralized finance, or "DeFi," insurance, which provides coverage for loss of funds due to lost private crypto keys or service provider shutdown, O'Connell explained. 

Since crypto insurance exists primarily on the exchange and wallet level, whether you're covered as a crypto purchaser depends on the crypto services you use. 

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