Korean Re, the only reinsurance company in Korea, has begun calculating insurance rates for cryptocurrency transactions to cover incidents such as hacking. This move is drawing attention from the industry as it comes ahead of the upcoming enforcement of the Cryptocurrency Users Protection Act on July 19.
Korean Re has started the rate calculation process for the launch of cryptocurrency insurance products, aiming for completion before the law takes effect. According to the Cryptocurrency Users Protection Act, cryptocurrency exchanges and businesses must either purchase insurance or set aside reserves to cover accidents caused by hacking or system failures. The minimum compensation limits are set at 3 billion KRW for fiat currency exchanges and 500 million KRW for coin market exchanges, wallets, and custodians.
The industry is closely watching whether relevant insurance products will be released before the law’s enforcement. The late start in calculating insurance rates had previously stalled product development due to a lack of essential data. However, now that Korean Re is undertaking this task, there is renewed optimism. An industry insider noted, “If the insurance rates are finalized quickly, defining the coverage scope and types will not take long, though the launch before the law enforcement remains uncertain.”
Even if insurance products are not released before the law comes into effect, businesses can comply by setting aside reserves instead of purchasing insurance. The law allows fiat currency exchanges and other cryptocurrency businesses to hold reserves equal to 5% of their asset’s economic value, up to 20 billion KRW, as an alternative to insurance.
Internationally, cryptocurrency insurance products are already available. In 2014, Great American Insurance Company in the U.S. became the first insurer to offer coverage for Bitcoin-related crimes committed by internal employees. In 2020, Lloyd’s of London provided liability insurance against hacking losses for online wallets via the Coincover platform.
Domestically, there are no existing insurance products for cryptocurrency-related incidents, despite the growing necessity due to the upcoming law. Korean cryptocurrency exchanges mainly carry personal data breach liability and executive liability insurance, but not for incidents like hacking or system failures. Major exchanges with substantial capital, like Upbit and Bithumb, can more easily set aside reserves, unlike smaller businesses that face financial strain.
Korean Re’s move to start rate calculations is a significant step towards launching cryptocurrency insurance in Korea. The industry is now keenly awaiting whether these products will be available before the enforcement of the new law.
