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2021 U. Ill. J.L. Tech. & Pol'y 75 (2021)
Insuring Crypto: The Birth of Digital Asset Insurance

handle is hein.journals/jltp2021 and id is 81 raw text is: INSURING CRYPTO: THE BIRTH OF DIGITAL ASSET INSURANCE Adam Zuckermant Abstract In 2019, a record twelve crypto asset exchanges were hacked, and an estimated $4 billion worth of crypto assets were stolen globally. In response, insurers have begun selling digital asset insurance to provide coverage for those holding large amounts of Bitcoin or other digital assets (also referred to as crypto assets). Digital asset insurance is already a multi-hundred-million- dollar premium market and is growing faster than cyber insurance. Despite its growth, promise, and increasing relevance, this is the first in-depth, scholarly analysis of this new industry. In this paper, I outline which insurers are providing digital asset insurance, how these companies are overcoming the challenges of underwriting this new insurance product, and which companies in the crypto ecosystem are obtaining coverage. I discuss several shortcomings in the new industry including the problems associated with the murky regulatory landscape, the lack of transparency for consumers, and the significant amount of bias around the crypto industry. I also provide two proposals for how digital asset insurance could be more efficient, effective, and could grow more quickly. First, I suggest that companies seeking digital asset insurance should explore captives, an insurance company wholly owned by the insured, as an alternative solution to informal self-insurance or traditional third-party insurance. Second, I outline how insurers could serve as a de facto regulatory force in the digital asset storage industry and why they would be a more effective regulator in the space than the government itself Throughout the paper, I argue that this new insurance product is a missing link in the crypto ecosystem and is essential to the greater adoption of crypto assets. Security-oriented crypto custody solutions have greatly reduced the risk of hacks, but these providers are all still new and relatively untested. Holding significant crypto assets is still too risky for many. Insurance provides the necessary safety net for people to feel comfortable holding, using, and investing in crypto assets. t Associate, Latham & Watkins and recent graduate of University of Pennsylvania Carey Law School. First and foremost, many thanks to Professor Tom Baker, who oversaw this research. I would also like to thank Sarah Downey, Yussuf Hussein, and Jeremy Sklaroff for their time and insights. Thank you also to Mia Cabello and Mike Buchwald for their helpful feedback. Lastly, I greatly appreciate the editors of the University of Illinois Journal of Law, Technology & Policy. 75

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