Digital assets are not exempt from old fashioned crimes such as fraud and burglary. Relm has developed a solution that ensures that all its clients’ financial assets are always comprehensively covered by including cryptocurrencies and its derivations under the definition of money.
Whether it goes by the name of Commercial Crime Insurance (purchased by non-financial businesses) or a Fidelity Bond or a Financial Institution Bond (purchased by financial institutions) these policies provide the same type of coverage as it relates to the protection of a business’s financial assets. This coverage is usually conveyed through the following insuring agreements:
– Employee theft/dishonesty – embezzlement, siphoning of company funds,
– Forgery or alteration
– Computer fraud
– Funds transfer fraud
– Forgery or alteration
– Money orders and counterfeit currency
– Inside/outside premises theft
Like all businesses, digital asset business maintain exposure to the loss, theft, or destruction of money, securities, and other property through events such as employee theft, computer fraud and funds transfer fraud, burglary and other criminal and fraudulent activities. However, when it comes to protecting assets of a digital asset company via commercial crime insurance, these types of businesses have faced two critical hurdles in obtaining meaningful coverage:
1. The definition of “Money” or “other Property” is specifically defined in a manner that excludes cryptocurrency, digital currency, virtual currency, electronic currency or any other type of digital representation of value that is not issued and backed by a domestic or foreign central bank or recognized public authority; and
2. The Computer Fraud and Funds Transfer Fraud insuring agreement excludes coverage for indirect attacks, e.g. social engineering, phishing, baiting, or pretexting, and therefore requires direct causation, i.e. a pure hack and takeover of the insureds system, or direct communication to the insured’s financial institution to transfer funds out of the insured’s account into an account controlled by the bad actor.
In order to provide a robust solution for the protection of both traditional and virtual financial assets, Relm’s commercial crime policy specifically includes cryptocurrency and its various derivations within the definition of “money” and contemplates coverage for loss arising frompeer-to-peer transactions. Further, we have added a separate insuring agreement for social engineering which provides coverage for fraud schemes in the event the insured is fraudulently induced to transfer money (including cryptocurrency) or securities out of its account or accounts under its care, custody and control, in good faith reliance following a telephone call, written or electronic instruction by a malicious actor under the guise of a client, vendor or employee.
Who is covered?
The operating business, and specific to coverage for employee theft, indirectly, clients of the business are insured against the loss of, or loss from damage to money, securities and other property resulting from theft or forgery committed by an employee of the business.
What is covered?
The loss of, or loss from damage to:
Money, which means a medium of exchange in current use and authorized or adopted by a domestic or foreign government, including currency coin, bank notes, bullion, travelers’ checks, registered checks and money order held for public sale. Specifically included within the definition of “Money” is “Virtual currency,” which includes but is not limited to digital currency, crypto currency, or any type of electronic currency.
Securities, which means any written negotiable and non-negotiable instruments or contracts representing either “Money” or “Other Property.”
Other Property, which means tangible property other than “Money” and “Securities” that has intrinsic value
What is excluded? (examples of exclusions – not meant to be exhaustive)
Claims related to fines, penalties, sanctions
Claims related to fraud or dishonest acts committed by a natural person with a 25% or greater ownership interest in the insured
Claims related to theft of intellectual property
Claims resulting from war, civil war, nuclear radiation/contamination, seizure or destruction of property by order of governmental authority