The FDIC rescinded FIL-16-2022 in March, paving the way for FDIC-supervised institutions to engage in cryptocurrency activities. These institutions were previously required to notify the FDIC and receive approval for activities that involved crypto. This new policy allows banks to “engage in permissible crypto-related activities without receiving prior FDIC approval.” While institutions are still required to manage the associated risks with crypto, the expansion of digital currency investment and use also brings new risks.
While traditional money is protected by banks and financial institutions, cryptocurrency operates in a decentralized system — meaning security and insurance coverage can be complicated. If someone hacks into your digital wallet and steals your assets, your insurance policies may not cover the loss.
The cryptocurrency market is also a frequent target for cybercrime. According to TRM Labs, the U.S. saw a 17 percent increase in crypto-related hacks in 2024, leading to nearly $800 million in stolen assets.
Cryptocurrency policies are a work in progress
Determining the monetary value of your cryptocurrency loss is the hardest part of potentially insuring these currencies. Because cryptocurrency is not backed by a government or tied to a physical asset, it can be volatile. And insurance companies generally don’t like to assume risk unless they know exactly the level of risk they are taking on.
“A dollar is always worth a dollar, but cryptocurrency’s value fluctuates dramatically,” says Sean C. Griffin, an attorney who specializes in cyber insurance.” Crypto that you buy and insure on Monday for so many dollars could be worth twice that amount on Friday. Or half that amount. Or, in the case of a rug pull, it could become worthless.”
Griffin identifies another risk that will resonate with anyone who has ever forgotten a password: “I also see cases where someone has lost the key to their Bitcoin account, and the policy only reimbursed them for the price they bought it for, not the current value.”
Because of the volatile price changes of cryptocurrency, you may want to consider having an “agreed value” limit if available. This means the carrier and you pre-determine the payment amount of the claim in the event of a total loss. It is a settlement technique often used for property whose value can quickly change such as antique cars or artwork.
A comprehensive policy should also include support from a cyber-security claims team to investigate and assist with any loss.
If you’re considering cryptocurrency insurance, look for coverage that addresses these key risks:
- Theft or loss of cryptocurrency due to employee or third-party fraud, from internal or external sources, especially if you use custodial services
- Loss of private keys, whether through hacking or accidental destruction
- Financial protection for both hot and cold wallets, since different storage methods have different risks
- Cyberattack protection, including malware, phishing or ransomware incidents
- Physical damage to devices storing private keys, such as loss due to fire, flood or theft
- Errors in transactions, such as accidental transfers to the wrong address
Insurance companies rely on historical data to assess risk. With cryptocurrency, the lack of regulation and extreme price volatility make insurers hesitant to offer coverage. Given these challenges, some insurers have started offering cryptocurrency-specific policies — but they come with limitations.
Can I buy cryptocurrency insurance?
Cryptocurrency insurance focuses on risks unique to digital assets, including cyberattacks, fraud and loss of private keys. Most existing cryptocurrency insurance policies are designed for institutions, such as exchanges, rather than individual investors. Some policies may cover exchange hacks or system failures, but coverage options for individual consumers are still rare.
Griffin says he sees many lawsuits seeking coverage for crypto-fraud, but he has not yet seen a policy that covers it. That said, there are some emerging options for individual crypto holders. These include:
- Specie insurance: This specialized coverage protects high-value assets, including gold, jewelry and cryptocurrency stored in cold wallets. If your private keys are physically damaged or stolen, specie insurance may help recover the loss.
- Standalone crypto policies: Some insurance providers now offer limited coverage for cryptocurrency stored in online wallets, financially protecting against theft or cyberattacks.
- Excess and surplus (E&S) lines coverage: Specialty insurers in the excess and surplus market may provide custom crypto insurance policies, but these can be costly.
Note that even these policies generally exclude losses due to market fluctuations, fraudulent transactions or misplaced passwords.
Homeowners insurance and cryptocurrency
Homeowners insurance policies cover personal property, or contents, but that doesn’t mean your crypto is protected. Most standard policies classify money—including cash, banknotes and coins — under coverage C: personal property. Coverage C typically limits the recovery of money, bank notes, coins and smart cards to $300 per loss. Similarly, commercial crime insurance policies do not cover cryptocurrency exposures as these policies were originally designed to address valuable physical property like cash, securities and precious metals.
Many policies specifically exclude virtual, electronic, or cryptocurrency from coverage altogether, so assuming your policy will cover stolen crypto will likely leave you empty-handed after a loss.
What about cyber insurance?
It’s increasingly common for home insurance companies to offer identity theft coverage or cyber insurance as an endorsement option. This added premium — or in some cases complimentary service — allows you to file a claim for expenses related to certain online risks, such as data breaches, fraud and liability claims. However, it rarely covers the actual loss or transfer of funds, meaning it would likely not cover cryptocurrency theft if assets were stolen in a hack.
The bottom line: Is cryptocurrency insurance worth it?
As cryptocurrency becomes more mainstream, the need for insurance coverage is growing. However, the currency’s foundation in decentralization makes it complex to insure. The insurance industry has been slow to adapt, and most policies offer limited protection. If you invest in cryptocurrency, you should take proactive security measures, such as using cold storage, enabling two-factor authentication and keeping backup copies of your private keys.
While specialized cryptocurrency insurance policies are emerging, they are often expensive and don’t cover market losses.
For now, Griffin says the best protection for your digital assets may still be strong cybersecurity practices and secure storage methods: “Honestly, the only thing an insured can really do is make sure that they get coverage for the cost they paid for the crypto. At least you’ll get that money back if you lose the key or if it’s stolen.”
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