Philip Martin, Coinbase’s Chief Information Security Officer (CISO), has confirmed the exchange has an insurance policy which covers its hot storage systems for up to $255 million. The exchange has had the insurance coverage with Lloyd’s of London syndicates since November 19, 2013.
“Exchanges and wallets should have sufficient Crime coverage to fully cover their hot wallets (including enough buffer to handle asset price spikes),” Martin added in his blog post. Indeed, Crime policy covers hot wallet losses as a result of a hack, insider theft, etc, but they don’t cover “failures of the underlying currency.”
Meanwhile, given a loss of cold assets is unlikely, Martin suggested this type of insurance should be offered on a per-customer basis.
Martin also discussed different insurance options. He wrote that most financial institutions use FDIC insurance, covering the consumer loss in case of insolvency, it does not cover exchange’s most likely cause of fund losses —hacking. Therefore, while FDIC insurance is used for deposits in fiat, it is not the only insurance Coinbase offers its customers.