The continued emergence of Cryptocurrency as an asset class and the development in the use of Blockchain/Distributed Ledger Technology is contributing to a significant rise in the level and scope of associated professional and/or financial services. Some of these services are regulated, such as an investment manager investing funds into companies operating in these sectors. Others are not regulated because they are connected advisory services, such as AML/KYC software or compliance advice. Investing or dealing in Cryptocurrency is not currently regulated (other than some cases where the trade is in a derivative product), but there seems to be a desire from most interested parties to introduce more regulation in a fairly short timeframe.
Setting aside the fact that Blockchain is just one example of Distributed Ledger Technology, and both exist in many forms entirely distinct from Cryptocurrency activities, the insurance market is tending to merge such activities together. Over time, we would expect the level of understanding within the market to increase and as such we should see a more sophisticated approach to the risks presented.
At this stage, most insurers are taking a general stance on their appetite for offering insurance policies to firms operating in these areas. Whilst the majority of insurers are currently steering clear and refusing to offer any form of cover for either direct or indirect risks presented, there are exceptions.
If you are involved in these activities, or considering entering the market, get in touch with us to discuss if and how you might protect yourselves against the risks faced.
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