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South Korean Insurance Firm Offers Insurance Against Hacking for Crypto Exchanges

Cryptocurrency exchange operators in South Korea can now be insured against hacks through an insurance firm that offers cyber-insurance to cover cryptocurrency losses.

Crypto-Insured

A typical cyber-insurance product compensates for the loss of personal information. However, a South Korean firm is taking the concept a step further by offering an insurance policy for money lost by cryptocurrency exchanges.

The ‘hack’ cover is from a local insurance firm known as ‘Hanwha Insurance’, and it will provide domestic exchanges with an added layer of protection.

A representative from Hanwha Insurance said: “We plan to start negotiations with individual exchanges for insurance starting next month.” He further added that “It is not a product that has to be compulsory, but it can be outlined if we discuss how much demand there will be. Even if the exchange wants to join, it will require as much coordination as the insurance and reinsurance companies need to meet in order to get insurance.”

A report from Asia Time further notes that some of the most prominent exchanges in South Korea and the world have been insured, including Bithumb for USD $5.3 million, Upbit for USD $4.5 million, Coinone and Korbit for USD $2.7 million.

The cryptocurrency industry is no stranger to theft. The hacking of exchanges and wallets has become an area of concern for governments, industries, and consumers. This has invariably led to several innovations in crypto-storage and security, as well as turning the space into a ‘high-risk’ area.

Reluctance

In 2018 alone, losses due to crypto-theft have surpassed USD $1.73 billion, more than half of the total recorded losses since 2011.

On the 20th of June 2018, Bithumb, the sixth largest exchange in the world and South Korea’s largest exchange, announced that it suffered a costly USD $31 billion hack. At that time the exchange ceased all cryptocurrency and fiat withdrawals, customers were also told not to deposit any cryptocurrencies due to Bithumb moving all its assets into cold storage.

A week later, with the help of other crypto-exchanges Bithumb had managed to recover just over a third (USD $14 million) of its losses. However, deposit and withdrawal services were reopened on August 4th, 2018.

Earlier in the same month that Bithumb was hacked, a lesser-known South Korean exchange CoinRail (90th in the world), also fell victim to a cyber attack which saw 30% of its traded coins stolen.

After the Bithumb hack, insurers were skeptical of cryptocurrency exchanges. One insurance industry official told Business Korea on June 25th, “The Korea Blockchain Association emphasized a stronger internal control system and security at the earlier sessions. But we cannot trust it as even the largest cryptocurrency exchange in South Korea was exposed to cyber attacks.”

The Korea Blockchain Association had begun discussions in June 2018 with another insurance firm as well as Hanwha to see how exchanges could take out a crypto policy. According to the association it has been in negotiating with insurers since April 2018.

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Crypto Needs More Custodianship Checks and Balances

Much good cheer came out of this year’s Consensus 2018 Blockchain Summit in New York, without the Lambos. However, there are many industry professionals who still feel that the space needs to develop a sounder structure.

The well-used traditional banking model requires expensive multiple participant involvement for every transaction and underlies a system which is sagging to the degree that many global banking systems are now being wooed by blockchain for their own ends. Tradition banking’s potential to simplify and create speed and efficacy at low cost remain bank-central with little apparent regard for the user or client, although this would be denied by many institutions. Bank profits remain the ultimate concern rather than client usability, transparency and low fees.

All the reason why the word cryptocurrency has rocketed into the lexicon of all but the most closeted of individuals. The decentralized market offers the user control and removes it from the service provider; one of its main attractions.

However, the cryptocurrency space is not without flaws and these can be seen with reports of hackings, fraud, crypto exchange misconduct and rule bending. Mike Belshe of Pensions and Investments sees this liberal climate as one that needs more “checks and balances”, citing the Coinrail and Coincheck hacking losses of this year as an illustration of this lack of security.

Belshe suggests that it’s a case of a solid infrastructure which he argues the industry is still lacking, as ironically decentralization hasn’t prevented the onset of centralized exchanges taking on the role of custodians of user assets. The solution to this, according to Belshe, is custodianship which is not built around exchanges and is independent of them, differentiating the exchanger role from the holder role in terms of responsibilities. He argues this qualified custodianship may even be mandated by the SEC.

He said, “If you didn’t have a bank to store your savings, what would you do? Put bars on the windows? Install a safe in a secret wall? Bury it in the backyard? No. You entrust it to people who know how to keep it safe, who know how to make sure you have access to it and who have all the safeguards in place to protect the assets you are managing for others.”

The fundamentals of custodianship require complete and transparent security, storage and regulatory compliance as an absolute guarantee for investors and until this can be guaranteed, the industry is not ready to gain the confidence of every user, be it institution or individual.

 

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$15 Billion Shed in Two Hours in Bitcoin, Crypto Markets Overnight Flash Crash

Over Saturday night on 10 June, Bitcoin and crypto markets dipped significantly, with Bitcoin shedding USD 300 in just over an hour, writes Inside Bitcoins.

The sideways market which has endured for some weeks finally came to an end when the mini-crash wiped out USD 15 billion off cryptocurrencies in a couple of hours.

The current scenario is that if Bitcoin slides, other cryptocurrencies tend to follow and this downward charge was again led by the major digital currency which has lost over 4.5% since its sudden drop in value in less than 24 hours. At the time of writing, other markets are falling with EOS, IOTA, Ontology, OmiseGo and Icon having had a particularly restless few hours.

The markets slid over 6% over the past day, creating a rush selloff. Currently, at a total capitalization of USD 324 billion, markets have fallen fast from yesterday’s level of USD 345 billion. At the time of press, Bitcoin is selling at USD 7,324 as indicated my CoinMarketCap.

Ethereum went with BTC and slid 5%, losing USD 25 in two hours, dropping to a new weekly low of USD 576 at time of writing. Previous to that, the currency had been hovering between USD 580 and USD 620 for over a week.

There is speculation that there may be two significant factors precipitating such rapid downward movement in crypto markets. Some pundits are pointing towards the news of yesterday’s announcement by the US Commodity Futures Trading Commission that they are investigating three major cryptocurrency exchanges: Coinbase, Kraken, and Bitstamp, along with others.

Others point to emerging news that South Korean crypto exchange CoinRail has been hacked, although the exchange is just ranked 90th in the world with a USD 2.6 million daily trading volume.

The biggest fall in the market’s top 10 has been IOTA, losing almost 12% on the day with USD 600 million wiped off its market cap, falling from USD 4.8 billion to USD 4.2 billion in a few hours.

Despite this slump, many analysts see this drop as insignificant. The 24-hour trading volume in January saw Bitcoin experience a trading volume of USD 17 billion in a day. Yesterday’s Bitcoin trading volume was a mere USD 4 billion, reports AMB crypto.

With market prices still in the follow-Bitcoin trend, a fundamental turnaround in market fortunes is reliant on Bitcoin’s performance over the following weeks.

 

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