For approximately the past decade, cryptocurrencies were used by those who wanted to transact business anonymously and without oversight or restrictions imposed by any governmental authority.  More recently, the concept of cryptocurrencies has been used to raise capital outside of traditional financial structures.  Indeed, the rise of raising money through the issuance of “virtual tokens” using “Initial Coin Offerings” (“ICOs”) has caused a sharp rise in the prevalence and market value of cryptocurrencies.

Those involved with cryptocurrencies believe that their virtues include stronger security against theft, easier transactions, and insulation from government-induced currency fluctuations, among other things.  But the inescapable reality is that hackers, technical errors, and fraud happen.  In addition, regulators have been taking notice and have been attempting to flex their authority, although the manner in which any given regulation applies to cryptocurrencies is far from certain.  One thing that is certain, is that the cryptocurrency “industry” poses unique and evolving risk.  Given this, the insurance industry is also engaged in attempting address the needs of this emerging market, although underwriters can be expected to rigorously assess the risks posed, and insurance procurement can be a challenge for some. Continue Reading The New Money: Cryptocurrencies and the Role of Insurance

Welcome to The Perkins Coie Tech Risk Report, a source for updates on, and analysis and interpretation of, insurance issues relevant to emerging technologies. We will address coverage issues related to cyber coverage, privacy, digital assets like cryptocurrency, Blockchain and other emerging technologies. The blog is written for start-ups and other companies dealing with emerging issues in the technology industry.

Attorneys from Perkins Coie’s Insurance Recovery Group will be the primary content authors. They will be joined from time to time by attorneys from other practice groups, such as the firm’s Blockchain and Virtual Currency, Emerging Companies, Technology Transactions and Privacy and Data Security practice groups.

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Cryptocurrencies, including bitcoin, may be the wave of the future, as more and more companies and countries accept them as valid forms of currency. As with any new technology, however, the potential for risk and error is prevalent. Although cryptocurrencies are backed by various blockchains designed to reduce risk, a certain amount of risk is unavoidable. And where there is risk, insurance follows.

For example, the Mt. Gox scandal, which is speculated to involve a bitcoin insider taking bitcoins from the exchange, is estimated to result in losses of more than $400 million. Traditionally, insureds attempted to find coverage for risks related to cryptocurrencies by finding novel constructions of provisions in extant insurance policies. Often, the insured was simply left without any coverage. But certain insurers have begun taking the bull by the horns and marketing a new kind of product—cryptocurrency insurance. Continue Reading Prepare for the Future With Cryptocurrency Insurance