Crypto custody newbie Anchorage says it has a fully insured solution for storing digital assets for institutions and investors, according to a blog post by the company.
In the post, the firm said its "end-to-end" insurance, which is offered through provider Aon, is different from its competitors inasmuch as its more complete.
"Here’s the problem with crypto custody insurance: not all coverage is equal," the firm said. "Most custodians’ architecture uses a combination of hot wallets and cold storage, and policies may vary from one part of the architecture to another. This approach can result in coverage gaps."
BitGo, which offers $100 million in crypto insurance through Lloyd's of London, does not cover situations in which BitGo and a client both hold keys. But those clients can obtain that insurance, however, through a third-party, according to a spokeswoman. Still, BitGo provides coverage for "Acts of God," meaning tornados, earthquakes, and other natural disasters.
Elsewhere, most firms only insure assets that are held in cold storage (meaning offline). The confusing and inadequate state of crypto insurance has been well-documented with roughly $6 billion insured, as per CoinDesk's estimates from late 2018. To the credit of crypto firms, it's not for a lack of trying. Many insurance providers aren't willing to make the full leap into the market.
"With Anchorage, investors don’t face such a trade-off," the firm said. "Our solution is built on new technology that advances beyond cold storage to enable online participation with offline assets. As a result, we were able to work with insurers to develop an insurance policy that breaks new ground for our industry, covering digital assets under custody end-to-end throughout their entire life cycle."
To be sure, questions still hang over Anchorage's policy. For instance, it is not clear what the cap on their coverage is as the firm declined to comment on the matter. "I think that this means it is lower that what other firms have announced," a source said.
Aon is a British-based insurance firm with over 50,000 employees and 500 offices globally.
Anchorage, an Andreessen Horowitz-backed firm, came out of stealth mode after a year and a half in January. The firm, which is also backed by Max Levchin, Elad Gil, Mark McCombe of Blackrock, and AngelList’s Naval Ravikant, raised $17 million to build its business.
It is making a bet that its solution’s design will lure investors to its platform. Simply, Anchorage will not custody client assets in cold storage, or offline, which is how Coinbase and BitGo custody assets.