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.

April 20, 2015 (New York).  Advisen, Ltd, a well known leader in insurance education and insight announced their nominees for the 2015 Cyber Risk Awards.  Innovation Insurance Group along with XL Group was nominated as this year’s Cyber Risk Innovation of the Year for its new to the market BitCoin Theft Insurance policy, BitSecure™.

BitSecure was designed by Innovation Insurance Group and Bitcoin Financial Group to provide “first of its kind” coverage for policyholders and their customers for theft of bitcoins, whether by electronic or non-electronic means, regardless of whether by a “rouge employee” or an outsider.

BitSecure has been called a “Watershed Event” byCoinDesk, ”a first for the digital currency industry” according to the Wall Street Journal and, in the words of Bitcoin Magazine, the policy is “ushering in a new era in bitcoin security”. 

For more information, including a Voting Ballot, click here.

Day/Date:      Tuesday, 4/28/2015

Time:             11:30am – 12:30pm (60 minutes)

General Overview of Session:

There are more than 13 million bitcoins—more than $8 billion—involved in tens of thousands transactions every month. Bitcoins have been recognized as virtual currency by the U.S. Treasury Department and deemed taxable property by the Internal Revenue Service. They can be converted to and from international currencies and used to buy everything from gift certificates to hotel room reservations. But what are the risks of bitcoins and other cryptocurrencies? This session is hosted by RIMS New York Chapter.

Moderator:           Ty R. Sagalow, CEO & Founder, Innovation Insurance Group, Bitcoin Insurance Agency
Speaker:                Robert Parisi, Managing Director, Marsh
Risk Manager:      James Kirtland, Risk Manager, Voya Financial

According to Mr. Sagalow, 2014 was “a bullish year for Bitcoins.” Trading volume in increased 57% to over $23 billion. The number of Bitcoin transactions climbed to over 100,000 per day and there are currently 82,000 merchants accepting Bitcoins, including Microsoft, Dell, Dish Networks, Time and Expedia.com. The number is expected to grow to over 140,000 by the end of 2015.

Venture capitalists are also becoming more involved in the Bitcoin market, says Mr. Sagalow. They invested over $335 million in 18 different countries in 2014. In addition, Bitcoins are becoming more accepted as a means to payment for transactions, and the number of Bitcoin accounts (wallets) is expected to grow to 12 million by the end of 2015 – an increase of 4 million.

Mr. Sagalow says Coinbase was the first to announce a fully regulated Bitcoin commodity exchange listed in over 25 states, and regulators, led by NY State, are becoming friendlier to the Bitcoin industry.

The insurance industry, according to Mr. Sagalow, is also getting involved as the new risks associated with the theft of Bitcoin become exposed. In fact, he says a large global insurance company is planning to announce the first Bitcoin theft insurance policy.

For more on Innovations in Insurance with Ty Sagalow, visit the WRIN.tv On Demand Library

Localised in 21 languages, audiences will be able to watch the feature-length production through 250 content platforms including iTunes, Amazon, Google Play and Comcast. Dish Network, which recently became the second biggest merchant to accept the digital currency, will also show the movie on demand.

Featuring cameos from Gavin Andresen, Roger Ver, Mark Karpeles, Jared Kenna, Charlie Shrem and Cameron and Tyler Winklevoss, The Rise and Rise of Bitcoin also offers insight into the first movers and shakers in the ecosystem.

Below is the trailer for the film:

Bitcoin Insurance Agency

At Innovation Insurance Group, we “get” bitcoin, and we set up an agency to handle the insurance needs, from the routine to the unique, of companies in the bitcoin industry. At Bitcoin Insurance Agency, we know the questions to ask and, through our “C” level relationships built over 30 years, we find the right insurance carriers for the specialized needs of the bitcoin community.

The panel will be moderated by Hank Watkins, who will engage the speakers in a conversation on three topics: (1) Reputational Risk, (2) Digital Currency (Bitcoin) Risk and Autonomous Vehicles (land and air), – each among the most commonly discussed risks the insurance industry has yet to provide a risk transfer solution to.  

Register here.

Our speakers are:

Ty Sagalow is the President of Innovation Insurance Group. Please click on this link to read Ty’s full bio on the Innovation Insurance Group website http://innovationinsurancegroup.com/about/ty-r-sagalow-ceo/ 

Dr. Mark J. Browne is the chair of the faculty of the School or Risk Management in the Tobin College of Business at the St. John’s University. Please click on this link to read Mark’s full bio on the St John’s websitehttp://www.stjohns.edu/academics/bio/mark-j-browne  

Peter Gerken is co-founder and Senior Vice President of Steel City Re. Please click on this link to read Peter’s full bio on the Steel City Re website http://www.steelcityre.com/ 

Hank Watkins is the President of Lloyds’s North America. Please click on this link to read Hank’s full bio on the Lloyd’ website http://www.lloyds.com/the-market/directories/corporation-of-lloyds/us-offices/new-york?LastName=watkins

In the third part of a series on Bitcoins, Ty Sagalow, President of the Innovation Insurance Group discusses “What’s News in Insurance” and how the peer-to-peer payment system has become more legitimate, if not more secure.

Recently, the U.S. Marshals Office auctioned 30,000 Bitcoins that were forfeited by Silkroad, one of the original Bitcoin companies allegedly involved in illegal activities.  Mr. Sagalow says “the decision by the United States Government to sell Bitcoins is significant, not just because they are worth about $18 million, in todays market…it really legitimizes Bitcoins.”

According to Mr. Sagalow, the U.S. Internal Revenue Service also announced that Bitcoins are considered “property” and can be used in taxable transactions. You can mow use Bitcoins to purchase items through Amazon and rent a hotel room via Expedia.com.  In addition, Mr. Sagalow says venture capital funding going towards Bitcoin investments and is supposed to top $300 million in 2014.

In this second part of the Bitcoin series in “What’s New in Insurance”, Ty Sagalow, President of Innovation Insurance Group, explains the growing legitimacy of Bitcoins, and risks associated with the peer-to-peer payment system.

There are approximately $8 billion dollars of Bitcoins around the world, says Ty, used to buy a growing number if online products and services. He questions whether holding and storing Bitcoins has risk and what it means for the insurance industry.

 Mr. Sagalow sees three main exposures: price fluctuation, mismanagement and theft. Mismanagement and theft offer opportunities for the insurance industry. According to Ty, “Mismanagement is an issue the insurance industry is familiar with and…risks covered by D&O carriers/underwriters on a daily basis.”  Ty believes Bitcoin companies should buy D&O insurance and will likely pay higher rates than more established companies.

 Great American and a number of Lloyds syndicates have announced the creation of Bitcoin theft policies.  According to Ty, Bitcoins “should be evaluated as a cyber risk” and offers opportunities for cyber and fidelity insurance carriers “too big to ignore.”

Ty Sagalow, President of Innovation Insurance Group, introduces “What’s New in Insurance”, a new segment on WRIN.tv that will look at new and emerging risks, new product and service developments as well as new ideas shaping risk management.

In the first of a 3 part installment of “What’s New in Insurance”, Mr. Sagalow looks at Bitcoins, the peer-to-peer payment system that uses open-source software.

Recently, Great American Insurance introduced a new fidelity insurance policy for Bitcoin theft.   According to Ty “…the market is still evaluating the policy…its terms and conditions as well as which companies are eligible to purchase it. “

Bitcoins have been around since 2009, when the first open-source peer-to-peer transfer software was first invented.” Ty explains that a” Bitcoin has no physical presence.” According to the U.S. Treasury Department it is a virtual currency.   Bitcoin has value, Ty says, “because…millions of people throughout the globe say it has value….A transfer or purchase using bitcoins has about 2% fee, (much lower than a credit card) and is anonymous.” 

Mr. Sagalow believes Bitcoins are here to stay. In the next edition of “What’s New in Insurance”, Ty will look at the risks posed by Bitcoins, and what new products are emerging to manage the risk.