Security is of paramount importance when dealing with digital assets. Not everybody has the technical knowhow or time to figure out setting up cold wallets so most casual crypto traders use exchanges.
A cybersecurity firm has recently published a report ranking the security of online cryptocurrency exchanges. Group-IB used the means of assessing insurance risk as the primary criteria according to reports. Using these metrics alone Kraken came out on top and OKEx, Huobi Pro, and CoinCheck deemed the riskiest.
The firm claims to have developed the world’s first insurance assessment system for covering cryptocurrencies stored on exchanges. The results then do not actually reflect real security risks, only the perceived insurance risk. The new insurance policy also covers losses from cyber-attacks on exchange software, theft, fraud, and illegal actions by staff. Companies such as CryptoIns offer to insure personal crypto holdings in this rapidly growing industry.
A number of different criteria are used to develop the framework, including the level of technical security, reliability of key storage, password integrity, and protection of user’s personal data. The use and level of know your customer (KYC) and anti-money laundering (AML) procedures were also rolled into the criteria. A Group-IB spokesperson told Hard Fork;
“In the first place, we assess how crypto exchanges deal with crypto and fiat assets: what are the exchanges assets keys’ storage and management procedures. In some cases, with founders’ consent, the assessment includes penetration testing using social engineering methods aimed at the network compromise through the most vulnerable link at any organization – humans.”
The exchanges were separated into four groups ranging from the easiest to insure down to the riskiest. Kraken came out on top posing the lowest risk to insurers; “According to our estimates, Kraken is the most secure exchange, with 1.25 percent insurance rate,”.
In the second group were Bittrex and Coinbase Pro which had a 1.5% premium for insurance premium protection. The largest group with a 1.9% premium included Binance, Bitfinex, Bithumb, Bitmex, Localbitcoins, MyEtherWallet, and Poloniex.
At the bottom of the pile and deemed the riskiest crypto exchanges were Yobit, Zaif, Bitstamp, TopBTC, and Bit-Z. These were considered such a high risk that they were removed from the list entirely.
There is a limit on the maximum amount of cryptocurrency that could be insured and at the moment it is 15 BTC or equivalent. Premium costs increased with the duration of coverage which could indicate that insurers are confident that prices will rise, or that the exchanges will become more prone to hacking and theft over time.