A Bitcoin storage service that insures deposits of the digital currency against loss and theft has launched in London.
Elliptic Vault uses "deep cold storage", where private encrypted keys to bitcoins are stored on offline servers and in a secure location.
The facility's founders say they are the "first in the world" to offer insurance for Bitcoin owners.Providing insurance for bitcoins is an important step in the currency's quest for legitimacy. Unlike traditional currency, bitcoins cannot typically be insured, and the BBC reports that this has led to investors losing substantial amount of moneys through theft or through accidentally discarding storage devices containing bitcoins. I have blogged previously about the dangers of bitcoin theft, and the implications these dangers have for bitcoin investment.
While insurance may alleviate some of the risks of bitcoin theft, some instability remains. The threat of political non-recognition of the currency, and restrictions on its investment, can have substantial impacts on the value of bitcoins. For example, I blogged a while back about some of China's restrictions on bitcoins and their plummet in value as a result of the closure of one of China's major bitcoin exchanges.
But bitcoin advocates are persistent. Even though China's central bank refused to recognize bitcoins, following the shutdown of the major exchange, new exchanges sprang up to fill the void. The Financial Times reports that Chinese exchanges have gained a "dominant share" of global transactions in the currency due to the exchanges' fast adaptation to changing legal landscapes.
It will be interesting to see if more insurers are willing to underwrite bitcoin investments. If this catches on, then risks of theft and hacking may be less of a systematic concern for the currency.