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Bitcoin exchange platform and payment solutions provider Coinbase, announced it has held insurance against theft or loss of its bitcoins for almost a year.
On August 27, San Francisco-based Bitcoin startup Coinbase revealed in an unexpected blog announcement that its Bitcoin funds were insured against employee theft and hacking "in an amount that exceeds the average value of online bitcoin it holds at any given time," as stated in Coinbase's FAQ page.
With 97% of customer funds stored offline, and thus not protected by its insurance, members of the community called Coinbase's terms "sneaky". Reddit user MrMadden wrote:
"Are we supposed to pretend that the 97% offline have zero risk of theft? If that was true why aren't those 97% insured also?"
According to the announcement, Coinbase partnered up with Aon, the world's largest insurance broker, adding that they were only using underwriters with high credit ratings, noting that Aon was rated A+ by S&P and A XV or higher by A.M. Best Rating (S&P, Fitch Ratings and Moody's Investors rated the Lehman Brothers' investment-grade of "A", just so you know).
Coinbase detailed the conditions for application of its insurance by specifying that it only covered "losses due to breaches in physical or cyber security, accidental loss, and employee theft.”
But still, bitcoiners are concerned about the lack of the insurance coverage lines, qualifying Coinbase's statement as "very vague and very limited.” Reddit user Flappy_Howserton asked:
"- What about natural disasters, fire, flood, etc.?- What about kidnap/ransom/extortion of employees?- What about lawful confiscation (usually not covered by policies)?- What are the actual limits of the policy?- Are the limits on a per-account basis (like the FDIC), per occurrence basis, or per policy period?- Was the policy designed to cover the type of hacking that allegedly occurred with Mt. Gox?"
"- What about natural disasters, fire, flood, etc.?
- What about kidnap/ransom/extortion of employees?
- What about lawful confiscation (usually not covered by policies)?
- What are the actual limits of the policy?
- Are the limits on a per-account basis (like the FDIC), per occurrence basis, or per policy period?
- Was the policy designed to cover the type of hacking that allegedly occurred with Mt. Gox?"
In its blog post, Coinbase challenged the other Bitcoin wallet services that declare to be "fully insured.” The startup said that despite their claims, some of them weren't working with "accredited carriers or outright self-injuring,” while others were able to claim to be "fully insured" simply because their number of bitcoins stored were "so low that a small insurance policy happens to cover everything until they grow.”
Among those who claimed to be insured are Circle, BTC Delta and Xapo. However, it should be noted that Xapo's vaults' insurance coverage is backed by Meridian Global Insurance Limited, a company wholly-owned by... Xapo.
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