Although the crypto market has grown exponentially in the past decade and is currently worth trillions in assets, it still lacks a comprehensive insurance system to back it up.

When observers note this fact, they often conclude that major insurance carriers simply view crypto as a structurally flawed or inherently uninsurable class. However, their hesitance to enter the crypto game does not stem from skepticism.

In reality, their decision-making process makes a lot of sense when considered from their own standpoint. After all, every emerging line of business must justify itself against alternative uses of risk capital. Plus, when it comes to diversified carriers, growth initiatives are assessed comparatively instead of in isolation. The question they ask is rather simple: does allocating incremental balance sheet capacity to digital asset risk produce a better return than deploying that same capital elsewhere?

Considering the state of the crypto insurance world, the answer to this question has, at least so far, been a resounding no.

In this article, we will explore why that is, what can be done to improve these odds, and how likely it is that the situation will improve in the future.

Opportunity Cost in a Finite Capital Framework

To understand why the insurance world still largely avoids interacting with digital assets, it is necessary to observe the situation from the insurers’ point of view.

Namely, insurance capital is neither passive nor infinite. Rather, it is carefully rationed across lines that must satisfy regulators, rating agencies, and shareholders, all at the same time. In such circumstances, insurers often tend to choose safer avenues of business than more unpredictable and volatile ones.

That is why segments such as cyber liability, specialty infrastructure, and climate-linked coverage have been so popular in their circles in recent years. After all, they offer both premium expansion and increasingly refined underwriting models. Additionally, they benefit from clearer historical data and more established supervisory treatment, both of which are crucial for insurance companies.

Against that backdrop, crypto underwriting seems like a much less desirable option. For starters, it is difficult to assess and price, as it is a fairly new type of asset that does not provide much historical data. In such circumstances, predicting and assessing the likelihood of loss is quite difficult.

Furthermore, digital assets are infamously volatile. Their value can vary significantly from month to month and even on a weekly basis. With such a degree of uncertainty, it is extraordinarily hard to set insurance prices that will not incur unnecessary costs for insurers.

And last but not least, it is important to mention that the crypto regulatory space is still new and evolving. While the Genius Act in the US and MiCA in the European Union have offered some much-needed clarity, insurers are still hesitant to enter the scene, seeing as how quickly new regulations are appearing and changing the game.

Thus, when the aforementioned alternative lines offer comparable upsides with fewer open variables, it is no surprise that most insurers choose to play it safe. After all, in this case, the conservative choice often means saving money.

The Political Optics

It is also necessary to consider the issue of visibility. When a large financial institution underwrites a risk class that later becomes highly politically controversial, the underwriting decision is often interpreted through a wholly different lens.

Digital assets are a great example of this phenomenon. Namely, they have occupied an unusual position in public policy debates ever since crypto became a mainstream topic in finance. 

First, there were the infamous disputes between the Securities and Exchange Commission and the Commodity Futures Trading Commission, which could not agree on how digital assets should be treated. In addition, high-profile failures—including the collapse of FTX—only served to intensify the scrutiny not only of crypto platforms but of associated service providers as well.

It is easy to see how that would have been an issue for insurers. For them, supervisory relationships are crucial. Even if a particular policy is narrowly constructed, broader association with a problematic sector can invite questions from regulators and rating agencies alike.

In that environment, restraint easily becomes a strategic choice that many make to preserve their standing and reputation. While the marginal revenue gain of engaging with crypto would be modest, the potential reputational losses could be significant. Thus, from a franchise-protection perspective, waiting can be rational.

The Data Problem (and Its Improvement)

Despite all of these obstacles, the crypto insurance scene is not at all static.

In the early days of crypto, the market was opaque and lightly institutionalized. However, today, blockchain transparency enables insurers to do granular-level analyses. Namely, institutional custodians publish security attestations and adhere to recognized compliance standards. Plus, security architectures (multi-signature wallets and MPC custody included) have matured considerably.

Moreover, crypto-native underwriting specialists have begun developing more refined approaches to operational and smart contract risk. Loss databases are expanding, and security audits are also increasingly standardized. So, while data remains uneven, it is by no means nonexistent anymore.

In this respect, crypto currently resembles the early years of cyber insurance. Initially seen as entirely unquantifiable, cyber risk gradually became modelable as loss data accumulated and underwriting discipline improved. While the trajectory is not identical, the path that crypto insurance is taking is definitely reminiscent of that.

With Regulatory Clarity Comes Further Progress

“If we take improved data as one pillar of progress that could finally entice traditional insurers to enter the crypto market, regulatory clarity definitely represents another.”

When regulators define asset classifications, custody standards, and licensing requirements with greater precision, insurers gain a firmer foundation for underwriting. After all, clear rules reduce ambiguity around policy triggers and liability allocation. They also enhance counterparty credibility, allowing insurers to differentiate between compliant and non-compliant actors.

To showcase just how much harmonized regulation can create a safer insurance environment, we only need to look at what MiCA has done for the European Union. By providing clear rules and standardized requirements across all member states, MiCA has reduced uncertainty for insurers, encouraged broader coverage of crypto assets, and strengthened investor protection throughout the EU.

As similar clarity emerges in other jurisdictions, underwriting models can incorporate regulatory compliance as a quantifiable risk factor rather than an unknown variable. Over time, this may allow insurers to standardize due diligence checklists and develop tiered pricing structures aligned with governance and custody quality.

Who Will Make the First Move?

Understandably, the biggest global insurance carriers have been the most reluctant to enter the crypto sphere. So far, specialty syndicates, niche markets, and jurisdictions historically comfortable with innovative risk classes have been responsible for most of the early expansion.

At the moment, the primary coverage areas include institutional custody, hot/cold wallet theft, and DeFi protocol vulnerabilities. As of 2026, the market is still maturing but also growing at an impressive rate. In fact, statistics show that the market could reach $9.4 billion (from the current 3 billion) by as early as 2033.

Still, only around 20% of crypto players are insured, which is a number that needs to improve a lot faster. For that to happen, large insurance firms need to step in and be readier to take risks. Hopefully, with new regulations going into effect and the market becoming tighter, they will begin to see the benefits of joining in.

Conclusion: From Optional to Inevitable

At present time, crypto underwriting still remains optional for large insurance players. The reality is simple: the sector does not yet represent a sufficiently large share of the global financial system to compel major carriers to participate.

However, as digital assets become more deeply ingrained in mainstream financial infrastructure, the calculus may very well shift. When exposure becomes embedded across custody, asset management, payments, and capital markets activity, insurance capacity may transition from optional to absolutely necessary.

At the moment, traditional insurers are not hesitant because they cannot conceptualize the risk that engaging with crypto poses. In reality, they are abstaining because, under current conditions, the institutional incentives to wait vastly outweigh the incentives to act.

When that balance tips, underwriting capacity will indeed expand. And once it does, it will reflect the long-awaited alignment between emerging markets and the conservative architecture of insurance capital—ensuring the finance world as a whole turns a completely new leaf.