Do you hold cryptocurrency in your business? Cryptocurrency fraud and scams have surged in recent years and global reports show steep rises in fraudulent activity involving digital assets.
But will a cyber insurance policy protect you if your crypto disappears in a hack or scam? That depends on your policy. Some insurers offer cryptocurrency‑specific cover. However many standard cyber insurance policies exclude losses tied to crypto payments, theft of digital assets or hacks on crypto wallets.
This guide explores the growing threat of cryptocurrency fraud and explains why careful review of your insurance policy is critical if your business holds or transacts in crypto.
Is cryptocurrency fraud a cybercrime?
In the UK, cryptocurrency is not considered legal tender, even though some businesses may accept it as payment. This problem creates confusion over whether your crypto assets can be protected.
According to the UK government, crypto assets are classified as a store of value, which means your insurance policy could protect your assets. The definition of cybercrime doesn’t pertain exclusively to fiat currency losses but to any attacks made via a computer, network or even the Internet itself.
This is why people have been successfully prosecuted for data breaches, even if there were no records of transfers leading to significant financial gain for the attacker. In short, cryptocurrency fraud is a form of cybercrime if performed online.
What are the different types of cryptocurrency attacks?
Cryptocurrencies’ anonymous and decentralised nature makes them attractive to businesses and investors alike. However, this same feature also makes them a prime target for cybercriminals.
If your business holds or is involved in cryptocurrency, here are some common attacks to be aware of:
Exchange or custodial breaches – Vulnerabilities in centralised platforms can lead to significant financial loss.
Wallet and private-key compromise – The most frequent and financially damaging risk, often arising from phishing scams or inadequate security measures.
Phishing attacks – Social engineering remains a major threat. Cybercriminals use phishing to gain access to wallets and private keys.
Cryptojacking – This attack involves installing malware on computer or mobile devices to hijack their processing power for mining purposes.
Dusting attacks – Got a random crypto transfer? This could be a dusting attack, where an attacker sends small amounts of cryptocurrency to multiple wallets to link them and de-anonymise users.
Countless other attacks exist that could separate you from your cryptocurrency. These attacks when successful are often highly lucrative for cybercriminals.
What are the biggest cryptocurrency risks for businesses?
Holding cryptocurrency automatically makes your organisation a target because of the rampant crime within this sector. Successful attacks could result in loss of funds, a drop in consumer confidence, and even lawsuits.
Some of the most significant risks to businesses include:
- Ransomware – Cryptocurrency attacks often begin with social engineering fraud and end with ransomware. Ransomware is special software that infects computers and encrypts everything. To decrypt it, you must pay a ransom, usually in crypto.
- Social Engineering Fraud – Social engineering attacks may target high-ranking individuals in your company or take advantage of insiders that may be willing to cooperate with them.
- Smart Contract Vulnerabilities – Firms using smart contracts can face risks if the contracts have security vulnerabilities or coding errors.
- Supply Chain Attacks – Any third-party service provider or vendor could also compromise your ecosystem through an attack on them. Unfortunately, to work with crypto, you will nearly always need to work with someone outside of your orbit.
In short, cryptocurrency security is a separate sub-niche from cybersecurity. The risks are similar to other attacks, but working with cryptocurrency means setting up a new security system to protect yourself. For this reason, many businesses avoid using cryptocurrency entirely. If you require cryptocurrency for your operations however, the answer is to protect yourself with a cyber insurance policy you can rely on.
Can cryptocurrency hacks or losses be covered by cyber insurance?
Cyber insurance coverage for cryptocurrency losses varies depending on your policy. Some insurers specifically exclude crypto, while others offer it as an optional add-on. Many businesses holding cyber insurance have discovered gaps in their coverage only after an incident.
The key takeaway is to review your policy carefully and speak with your insurer about what is and isn’t covered. It’s far better to clarify these limits now than to face uncertainty after a cyberattack.
The impact of crypto attacks for businesses
Crypto-related attacks can have a serious impact on businesses, potentially causing loss of revenue, cash flow issues, reputational damage, and reduced customer confidence.
Without insurance:
- Loss of cash flow and revenue
- Business disruption
- Potential legal action
With insurance:
- Claim for cryptocurrency and related losses
- Receive reimbursement according to your policy
- Resume normal business operations
Having cyber insurance that includes cryptocurrency coverage can make a critical difference in how your business recovers.
How to protect your business against crypto fraud
Even with cyber insurance, all cryptocurrency fraud will lead to significant business disruption. The best course of action is prevention.
Follow these simple tips to protect your business against crypto fraud:
Educate Your Employees
The first step is to provide comprehensive cybersecurity training to all employees. Emphasise the most common risks, including phishing, fraud, social engineering and the importance of keeping private keys safe.
Use Strong Authentication
Implement Multi-Factor Authentication (MFA) for all systems, including those non-crypto-related.
Choose Reputable Wallets/Exchanges
Ensure you only work with well-established exchanges and wallet providers. Most of your crypto should be put into cold storage even after finding one, not in hot wallets connected to the Internet.
Segregate Access
Limit access to all cryptocurrency activities. The fewer people that can access your crypto assets, the more secure your business is.
Monitor Transactions
Maintain an ongoing monitoring system for all cryptocurrency transactions. This should be implemented in conjunction with a robust reporting system.
Avoid Unverified Investments
Businesses often use crypto investments to make money. This is also one of the most common avenues for scams. Always ensure that any investment receives appropriate due diligence, regardless of the amount.
Above all, ensure you hold a cyber insurance policy that you can rely on. At Stanmore Insurance, we specialise in supporting businesses that require robust anti-cyber attack coverage to give them peace of mind. To learn more about your policy options, or to get a quote, contact Stanmore Insurance today.