May 31, 2018 Articles

Coverage for Bitcoin Losses . . . or Is There?

The very nature of Bitcoin—including where and how the virtual currency is stored—may ultimately affect whether insurance coverage exists under homeowner’s and crime policies if the currency is lost or stolen

by Stephen D. Palley[1]

It is hard to open a newspaper without reading something about blockchain technology. If one is to believe the hype, this new technology will revolutionize business practices, change the very nature of contractual relationships, and maybe even save the whales. [2] Whether reality lives up to the hype remains very much to be seen. But blockchain usage has become a reality for enough businesses—whether through the use of a cryptocurrency such as Bitcoin or otherwise—that it is worth considering the risk associated with the technology and the applicability of insurance to potential losses.

This article begins with an overview of the technology. We then look at two kinds of potential first-party insurance coverage for Bitcoin losses. Bitcoin is the most prominent use of blockchain technology, and the coverage issues it presents may illuminate risks associated with the underlying technology in general.

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