Insuring Digital Asset Custody to Meet Fiduciary Obligations
Novel Sets of Risks
Financial institutions are increasingly gaining exposure to Bitcoin, raising new sets of risks for responsible asset managers inclined to rely on specialized trusted third parties for the custody of private keys.
Yet, insurance policies for service providers still fall short — policies are usually structured with limits shared across multiple clients. This structure can introduce potential counter-party risk.
As an example, a customer with $100 million of bitcoins may choose to keep their funds with a custodian holding $1 billion in assets, and advertising a $100 million insurance policy. The custodian is 10% insured, yet the customer is given a false sense of security believing that the $100 million policy will be able to cover their holdings. In fact, in the event of a total loss, the customer will be reimbursed $10 million, forced to accept a $90 million loss. The total limit is most commonly shared across clients.
We provide insured Bitcoin custody — allowing institutions to meet their fiduciary obligations.
We protect clients such as asset managers, liquidity providers, and exchanges against losses — including both external theft and internal collusion — up to the full value of their holdings. The Knox insurance program was developed hand in hand with Marsh, the world’s leading insurance broker and risk adviser.
Knox recently raised $6.2 million (USD) in funding led by Initialized, iNovia, with participation from Fidelity Investments Canada, FJ Labs, and Ferst Capital.
“Entities who have their bitcoins managed by a third party deserve the right to insurance. Too often, insurance policies are purchased for marketing purposes instead of transferring the risks that matter. Our insurance program is designed to allow fiduciaries to meet their obligations”, said Alex Daskalov, Founder and CEO of Knox.
Knox designed its custody offering with financial institutions in mind, offering:
- Financial Protection — insurance coverage up to the full asset value held under custody
- Simplicity — intuitive product interface for back office teams and fund administrators
- Bespoke Governance — internal control policies on transactions are defined by clients
Clients can access their Knox custody account with a dedicated terminal via a secure end-to-end system. Internal control policies — rate limits and number of signatories — are set by firms as part of a customized governance model.
“It’s extremely difficult for customers to detect and evaluate the risk exposure these problems create for them and this provides a false sense of security. There is a growing appetite for more comprehensive insurance policies covering Bitcoin custody. Knox brings peace of mind to responsible entities that are exposing capital to this nascent asset class”, Garry Tan, Managing Partner of Initialized Capital.
Early Access On-Boarding
Knox is proud to be unveiling its custody product to institutions as part of an early access program.
If you are interested to learn more, please email us at email@example.com or visit our website at https://www.knoxcustody.com/demo.
Backed by leading institutional and venture partners, Knox provides Bitcoin custody with comprehensive insurance coverage for the full value of holdings. Knox blends simplicity with uncompromising security to allow institutions to meet their fiduciary obligations. All clients have access to Knox’s secure end-to-end system using a dedicated terminal to manage assets. The insurance protection for client assets is subject to the full terms and conditions of the policy.
For accredited and institutional investors only.
Services and products are offered through Knox Industries, headquartered in Montreal, Canada. Knox Industries is not engaged in the offer, or sale of securities or bitcoins, and does not provide investment, tax or legal advice.
Investments and holdings of bitcoins, and digital assets are speculative and highly volatile, involving a substantial degree of risk, including the risk of complete financial loss. Digital assets, coins, tokens and cryptocurrencies can become illiquid at any time, and are for investors with a high risk tolerance. There can be no assurance that any form of digital asset will be solvent.
© 2019 Knox Industries. All rights reserved.