POL I CY The Israeli Insurance, Pension & Finance Newspaper 27 Special edition 2022 Cryptocurrencies (Initial Coin Offerings), the ISA has warned that this may be considered as an offer to the public of securities and must be made in compliance with securities law. In doing so companies must make clear what rights are offered to investors and ensure they are sufficiently clear and detailed. It must also be apparent what rights exist to sell on the coins in a secondary market and whether investors will be permitted to do so in exchange for a financial return. The key for these companies will be to offer as much transparency as possible, including in relation to the activity and the individuals of the relevant company. Like the UK and US, the ISA expressed concern as to the level of exposure inherent in cyber risks including, the fluctuation of value, the level of credibility of trade platforms and the potential vulnerability to fraudulent activities. Additionally, the ISA queried the potential for conversion to New Israeli Shekels and other types of fiat currency. While there are currently few claims before the Israeli courts, one such crypto-claim deals with the loss of keys to a digital wallet which, allegedly, generated a loss of NIS 246M. These types of cases are certain to increase in number and the courts (and insurers) will have to grapple with such issues as to whether cryptocurrencies are “property” and, pertinently, whether damages to such “property” could fall under the definition of applicable insurance policies. Comment Even the so-called benefits of cryptocurrencies cause Insurers pause for thought, such as the insultation from government control and influence, which can limit the impact of inflation and deflation on value. crypto prices rise and fall by thousands of dollars day to day and its value is suspectable to dramatic changes due to geopolitical events that are uncontrollable. There are also real risks, which in part explains the global reticence to offer crypto coverage. Additionally, while in theory cryptocurrencies should be less prone to volatility (as a result of capped capitalisation), it is still influenced by supply and demand and more pressingly, media hype. As such, cryptocurrencies can be volatile, which creates difficulty in determining premiums. Practically, there is a lengthier and more work intensive underwriting process given the risk of insuring an unregulated market. While each global hub has differing approaches to the treatment and regulation of cryptocurrencies, they are united in one fact: the risk profile for cryptocurrencies is not yet properly understood and as such, the risk vs. return does not warrant mass coverage. However, it is precisely for the fact that the risk profile is not yet understood that it is so important that crypto coverage develops in order to offer individuals and businesses alike the necessary protection to safely operate cryptocurrencies. This will lead to mass adoption, which will mean increased regulation. Only then can the insurance market develop in tandem with the technology, with savvy insurers getting in on the ground floor. Jurisdictions affording consumers diverse levels of coverage will lead to commercial uncertainty and a continued staggered approach to coverage. Jurisdictions should share information and, to the extent possible, positions on crypto coverage. The future of crypto coverage is global. Jonathan Marcus Translations Hebrew-English-Hebrew translation of Insurance and financial documents Insurance policies▪Appraisals and loss adjusters reports Proposalss▪Financial statements 25 years of professional experience in the insurance sector Phone: 972-54-4757622 ▪ Fax: 972-2-5616099 ▪ E-mail: jmtargum@gmail.com
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