Last year, China made a decision to outlaw Initial Coin Offerings (ICOs) in the country. China’s main reason for this was the increase in cases of pyramid schemes masquerading as ICOs in the country. The government also considered the ICO structure of raising funds illegally.

What are ICOs and why are some governments (some) against them?

ICO (Initial Coin Offering) refers to a situation where a new cryptocurrency network offers presale of its own coins in exchange for other altcoins. The cryptocurrency uses the raised funds to develop its own platform. Investors, on the other hand, hold onto the new tokens until their value increases.
Here are reasons why some governments are against ICOs and how insurers are stepping in to solve the issues involved.

Scam ICOs

Lack of proper knowledge about the cryptocurrency industry has pushed millions of people to invest in ICOs that turned out to be scams. The ICOs promise revolutionary technologies on their cryptocurrency network to attract investors’ attention. In most cases, scam ICOs offer little more than a white paper. They then hype their networks to raise funds and later flee with investors’ money.

ICOs are seen as a threat

Governments like the Chinese government approach foreign investments into the country cautiously. Some governments have very strict financial rules and tend to create structures suitable for their people.

Risk for Investors

ICOs sometimes fail. Many ICOs have failed to attract enough attention to become valuable and pay back their financiers. Only ICOs with a highly innovative network have succeeded. Most of the less-known ICOs fail to raise enough money to develop their platform.

ICOs turn to insurance: Is it Interesting?

The insurance industry has already identified key areas in the cryptocurrency industry where their services are needed. Insurance against theft, for example, is one of the major issues in the industry they can cover. Next on their list is ICOs. To help legitimize ICOs and protect both the new cryptocurrency network and its financiers its, insurance groups are fast partnering with ICO founders.

The result of insurance firms covering ICOs

• “ICO reputation will improve-the stained reputation of ICOs is likely to improve if insurers accept to cover investors, https://www.coindesk.com/pboc-advisor-china-right-ban-icos/.
• Government focus on banning ICOs will reduce-if ICOs become legitimate, there will be less scrutiny and threats from governments.
• Investors will be more informed on where to invest. Every ICO will want to take insurance coverage in order to look genuine and attract more financiers.
• ICO security will improve-investors will become confident in ICOs as they beef up their security measures to attract the best insurance platforms.
• Insurers will act as regulators-it’s possible that insurance companies will play the role of regulators by guiding investors where to invest. Over time, scam-ICOs will reduce.
  Important points:
• Many insurance firms are still not confident in ICOs.
• However, insurers who back promising ICOs stand to win and benefit their partners in a big way.
• Covering ICOs with great potential may revolutionize the cryptocurrency industry.

Bitcoin thefts

Unfortunately, just like anyone else, hackers and thieves also want to have Bitcoins but for free. Set aside jokes, Bitcoin thefts are a major problem nowadays, however, as a Bitcoin owner you may avoid those through a number of methods. For instance, you should never share your wallet’s private address with anyone, you should use hardware wallets rather than online wallets. As a matter of fact, not only Bitcoin owners are at the risk of Bitcoin thefts but so are the miners.
Bitcoin theft incidents.

A rather well-known cloud mining marketplace called NiceHash, in December 2017, has become a victim of a hack during which the thieves managed to steal 4,736.42 Bitcoins, which at the time were worth more than $75 million. The main problem of similar thefts is that blockchain technology ensures its users with anonymity. In other words, the technology makes it impossible to find out whose wallet belongs to whom in order to trace the people who steal the cryptocurrencies. Unfortunately, NiceHash is not the only company that suffered from similar hacks. Even earlier, in 2016, Hong Kong based exchange called Bitfinex has lost 120,000 BTC (back at the time 1 BTC was worth around $650). This theft resulted in a fall of Bitcoin price from around $650 to $550, due to public panic all over the Bitcoin platforms.

The issue behind the thefts and potential solutions

The list of similar accidents can go on but as a Bitcoin user or miner, you always have to avoid from storing your cryptocurrencies online and pay a lot of attention to its safety. Please note that similar accidents happen usually because the platforms or the online as well as software wallets those platforms offer are not secure enough and just like any other online platform can be easily hacked. In other words, these unpleasant theft incidents are not because of Bitcoin is a bad cryptocurrency but because of people and companies not storing their coins optimally enough. The good news is that the number of insurance companies that start considering to provide services for ensuring Bitcoins are increasing with the popularity growth of this digital money. Currently, there already are some such insurance companies, however, even before making a deal with the insurance companies you have to make sure that those are reputable, reliable and are not scams themselves.

Summary
The current structure of cryptocurrencies puts off many insurance companies from insuring ICOs. However, some companies are increasingly making bold moves on ensuring promising ICOs. This will likely determine the next phase of the industry. Do you want to gain an in depth understanding of ICOs? Check out this article to learn about ICOs.

FEBRUARY 25, 2015, NEW YORK.  Bitcoin Insurance Agency though its operating company BitCoin Financial Group, LLC announced the first successful design and purchase of a true Bitcoin Theft Insurance Policy. BitSecure™, a proprietary insurance policy designed by the Company was created for BitGo, Inc., the leader in Bitcoin security platform and a pioneer of multi-sig technology. Bitcoin Financial Group worked closely with the insurance carrier providing the coverage, a well known Global A-Rated insurer. The policy provides a robust cyber and professional liability insurance that goes well beyond narrow crime policies previously adopted by some bitcoin vault providers. BitGo customers who opt-in to the program are protected from any act, error, or omission of BitGo technology, processes, and employees, including external hacking incidents and employee theft. Both hot wallets and cold storage are eligible for coverage under the policy. In the event of a covered loss, the policy would reimburse BitGo’s customer, as a direct loss payee, for the full value of the stolen insured bitcoins, subject to the full terms of the policy. In addition, the policy provides BitGo unprecedented ability to work directly with its customers in the management and resolution of such incidents.

“In collaborating with BitGo and Innovation Insurance Group, we tailored a first-of-its-kind insurance product to help protect the rapidly growing bitcoin industry,” said John Coletti, Chief Underwriting Officer, Cyber, and Technology Insurance, XL Group.  

“We have seen early attempts at insurance in the bitcoin market, such as those based on a captive model funded with cash reserves or “crime” policies that solely cover employee theft of cold storage keys,” said Ty Sagalow. “While this was suitable for Bitcoin’s formative years, it does not scale to the requirements of today’s ecosystem. BitGo’s multi-signature technology alters the threat profile to the point that a properly balanced insurance product can for the first time be brought to market at a price in line with typical cyber risk.”

Read Official Bitgo Press Release

Read CoinDesk Article

Read Bitcoin Magazine Article

Read CyptoCoins News Article

Read WSJ News Article

Bitgo CEO YouTube on BitSecure Product

Learn More about BitSecure

Read Official Bitgo Press Release

Read CoinDesk Article

Read Bitcoin Magazine Article

Read CyptoCoins News Article

Read WSJ News Article

View Bitgo’s CEO YouTube on BitSecure Product