Cybersecurity firm Group-IB assessed and graded the security of online crypto exchanges recently to determine the insurance risk of investor’s assets on the platforms, per a report on the Next Web Hardfork. In partnership with Swiss insurance broker ASPIS SA, the developers of the CryptoIns project, both firms analyzed over 20 crypto exchanges and wallet providers using verifiable data from open source data from the exchanges and Group-IB’s proprietary system.
Cost of Insuring Digital Funds
Based on the risk score derived from the assessment, CrytpoIns experts then create a rate for insuring digital assets on a number of digital assets platforms and wallet providers for specific time periods.
These platforms include popular digital assets platforms such as Poloniex, Blockchain.info, Binance, Bithumb, and others. Based on the report, U.S. based Kraken is the most secure exchange and the least expensive to insure assets on.
The assessment considered the technical security of each platform, key storage, and safety of passwords. Other criteria that were considered include the individual risk management systems of each digital asset platform and the availability of know-your-customer (KYC) and anti-money-laundering (AML) guidelines.
Over $800 million has been stolen due to targeted attacks on cryptocurrency exchanges from 2017 to the first nine months in 2018. Within this period, a number of exchanges have been hacked, with a large majority being linked to North Korean state backed the Lazarus Group.
CryptoIns grouped exchanges into four risk groups based on the aggregated information. The first group is the least vulnerable, second and third groups are “rated satisfactory and low in security risk. ” The fourth group are for exchanges that are very risky. According to the report, CryptoIns doesn’t provide insurance for exchanges that fall within this category.
While the Bank of International Settlement has often highlighted the lack of trust as a limiting factor for cryptocurrency adoption, as the nature of the decentralized consensus seen to be so fragile that a cryptocurrency can stop working, the imminent threat to both retail and institutional adoption of digital assets is their safety.
Commenting in Group-IB’s press release, Andrey Busargin, Director of Brand Protection at Group-IB argued:
“The crypto industry does not have sufficient means of securing customers’ funds against attacks by scammers and hackers.”
He went further to explain the benefits of protecting digital assets with insurance, stating:
“Under the current circumstances, insurance of cryptocurrency assets on crypto exchanges is a good way to shield yourself from the risks most users are usually unaware of. Without a doubt, to create an insurance product, it is important to involve independent experts specialized in countering cyber threats, who have access to unique data sources for crypto exchanges’ security assessment. Cryptocurrency exchanges collaborating with Group-IB help us create a more detailed cybersecurity profile, which at the end of the day improves their security and attracts new customers.”
With the assessment score released by CryptoIns, investors can now insure their holdings. The base insurance rate on the CryptoIns platform is 2.5 percent per quarter. Kraken happens to be the most secured exchange in the world, making the funds cheapest to insure at 1.25 percent insurance rate, according to the report.
Based on the report, the insurance policy will cover users against losses accruing from cyber attacks on exchanges, theft or illegal actions of digital exchange personnel.
So, for every 1 BTC insured for 90 days on Kraken, the cost of insurance will be 0.0125 BTC. The same BTC value on Bittrex and Coinbase Pro will cost the investors 0.015 BTC. Other platforms Localbitcoins and Bithumb will require a premium 0.019 BTC for insurance.
For cryptocurrencies that were labeled least secure, such as Yobit, CryptoIns didn’t reveal the details that were considered to score the exchange as being too risky to insure. Investors also have the opportunity to cover their investment for a full year.