While users of the troubled Quadriga CX cryptocurrency exchange remain unable to retrieve millions in funds, a startup backed by mainstream companies such as Goldman Sachs says they’re able to offer some protection.
BitGo Inc., which provides custodian services on more than $2 billion in digital assets, said it has obtained a policy of as much as $100 million through Lloyd’s insurance marketplace that covers the offline storage accounts known as cold wallets that are at the center of the Quadriga debacle. The company has no involvement with Quadriga, which has been unable to access the access the accounts since the death of its founder.
In place since January, the policy covers hacks, insider theft by employees and loss of keys needed to unlock the funds, BitGo said in statement Tuesday. The insurance covers only the funds that are under complete BitGo control. San Francisco-based BitGo is backed by DRW Holdings, billionaire Michael Novogratz’s Galaxy Digital Ventures and Goldman Sachs.
While traditional bank deposits are insured up to a certain amount, crypto deposits often are not — or only in certain cases, subject to many exclusions. While many exchanges that store customer funds, such as Coinbase Inc., do have insurance, those policies typically only cover so-called hot wallets that are Internet-connected and used for immediate trading of customer coins.
Lloyd’s-affiliated insurance companies have sold cold-wallet insurance since 2014, but most of the policies issued have had smaller limits, or didn’t cover as much.
“The size of the limits, the breadth of the coverage that BitGo has bought is the first of its kind,” said Nicholas Edwards, who heads one of the insurance consortia that participated in providing BitGo’s coverage through Lloyd’s. The consortia, called AmTrust, typically insures assets such as gold, fine art and cash.
“It’s a huge thing,” Mike Belshe, BitGo’s chief executive officer, said in a phone interview. “We’ve had clients that wanted to see this before we finished their onboarding process. This gives them peace of mind.”
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