Efforts continue to be made to restore investor trust in the crypto markets. DeFi insurance provider InsurAce is introducing the “Crypto Deposit Insurance Scheme,” a new crypto deposit insurance program (CDIS.)
Reaction to Ailing CeFi Industry
The product is being released in part as a reaction to the problems that plagued CeFi throughout 2022. Consumer faith in cryptocurrencies has been shaken by the failure of Celsius, Voyager, BlockFi, and, most recently, FTX.
Dan Thomson, CMO of InsurAce commented on how crazy the last 2 weeks have been in the crypto space. Thomson shared a personal experience, saying that he recently had to break the terrible news to a friend who held “six figures” in BlockFi, which has since been frozen as a result of the company’s confirmation of liquidity problems related to FTX.
Only 10% of client funds were kept in collateral by BlockFi, according to a report from earlier this year. Following a bailout, the company also had credit lines with FTX, however, these funds are no longer accessible due to FTX’s bankruptcy.
$40,000 In Claims to Be Disbursed
According to the InsurAce CMO, the company had “around $40,000 in coverage obtained for FTX,” which means it will now be obligated to pay out on those claims. The exposure, however, was limited to one insurance policy.
He added that it would take some time for all the pending claims to be processed but assured that the company would make “whole again” the customers that did suffer.
FTX Collapse Will Improve Industry
The FTX disaster, according to Thomson, shows that there are still many obstacles to be overcome in the crypto space and numerous issues that need to be resolved. On the flipside according to him, disasters like these do push the industry to get better.
By providing something akin to the FDIC insurance that depositors can receive within the conventional banking system, the new InsurAce CDIS product seeks to alleviate some of the problems. The purpose of using a DeFi product to compensate potential losses on centralized exchanges is to “protect the most vulnerable users of CeFi.”
The CDIS insurance scheme requires exchanges to come on board and adopt the product. According to Thomson, InsurAce is in talks with more than 30 different exchanges and anticipates launching the product soon.
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