The Central Bank of the United Arab Emirates (CBUAE) has approved a new product allowing an issuer to provide digital assets custodial risk insurance.
Hong Kong-based insurance provider OneDegree and the UAE’s Dubai Insurance announced that they started providing digital asset custodial risk insurance to UAE customers. The companies, collaborating on a brand called “OneInfinity,” said that they got approval from CBUAE to offer the product.
Custodial risk insurance is part of the risk management strategies for custodians, exchanges and other digital asset service providers. According to OneDegree, many regulators worldwide require the product.
Custodial risk insurance covers the risk of losing access to crypto
Robin Scott, the general manager of OneDegree in the Middle East, explained that this type of insurance enables crypto service providers to give their clients “peace of mind” against the risk of losing their assets. Scott explained:
“Custodial risk insurance covers Web3 exchanges, custodians, asset managers, etc., against the risk of losing access to customers’ digital assets. This may be caused by a hacking event, physical damage to the storage media or internal fraud.”
Scott also explained that custodial risk insurance is Web3’s version of public deposit protection schemes, which are used in traditional banking. “For the Web3 industry, mandatory insurance acts as a private sector solution to achieve similar aims,” Scott added.
The executive also told Cointelegraph that regulators worldwide require this product because their primary focus is consumer protection. The insurance executive said regulators want to ensure that businesses and individuals using digital asset platforms that they provide licenses to are protected in case of asset losses.
Related: UAE regulators to allow Dubai-licensed VASPs to service entire country
The insurance professional also said that the CBUAE approving their insurance product means that companies in the UAE can finally acquire this insurance within the country. “This means that companies in UAE will be able to buy custodial risk insurance on-shore in UAE for the first time,” he added.
Scott added that OneDegree and Dubai Insurance have already started writing custodial risk insurance for UAE-based clients. The executive said that they are expecting a large number of firms to require the insurance product as more companies get licensed in the UAE.
Magazine: Asia Express: WazirX hackers prepped 8 days before attack, swindlers fake fiat for USDT