Cryptocurrency is still in its infancy, especially compared with stock trading, which surfaced in the 17th century. As the emerging industry proves itself, and goes through low points alongside the global economy, the federal government and private institutions are hesitant to provide insurance to consumers.
Eyhab Aejaz, a former managing director at Liberty Mutual Insurance, did not want to wait for the traditional insurance industry to catch up: Three years ago, he and co-founder Iain Fraser decided the time was right to launch their own crypto insurance company. Breach Insurance Solutions Inc. says it provides the first regulated insurance product for consumers. The Boston company covers investors from theft of their crypto in qualified exchanges, including Coinbase, CoinList, Gemini and Binance US. Breach also plans to launch a commercial version of its services for institutions. The company has 10 employees and raised a $2.5 million seed round last year, Aejaz said.
Earlier this year, hackers reportedly stole more than $30 million in Bitcoin and Ethereum from cryptocurrency exchange Crypto.com, affecting nearly 500 users. In 2021, there were more than 20 exchange hacks where at least $10 million was stolen, according to a report by NBC News. Breach is not in the business of insuring users for cryptocurrency lost to scammers. Measuring these individual losses is more difficult to calculate, but more than 46,000 people reported to the Federal Trade Commission losing over $1 billion in crypto scams between January 2021 and March 2022.
Aejaz recently spoke with BostInno about launching a startup in an untested industry, the future of crypto insurance and what makes Boston one of the nation’s crypto hubs.
Why did you decide to go from an institution like Liberty Mutual to starting your own company in an uncharted field?
In my personal life, I started to get more and more exposure and interest in crypto. I was seeing that crypto wasn’t necessarily investing people and capital into understanding regulated insurance and regulated financial services. And then the same goes for insurance, which wasn’t necessarily looking to insure or understand crypto. So I saw this gap and I was like, this needs filling.
Why haven’t traditional insurers ventured into crypto yet?
In their defense, you can’t go after every shiny thing. Otherwise, what you’re doing is distracting from the things that are paying the bills today. You can’t compromise that balance sheet just going after the shiny object. The reality is that mature organizations have to be very methodical about industries and product lines that they dabble in.
And this is just par for the course for any new segment that’s being created. You let the startups kind of initially pave the way, and then you either invest in those startups, you partner with them or you’ll acquire them.
What do you consider the crypto hub of the U.S.? Why choose Boston for your base?
If there’s somebody that raised their hand to be that, it’s probably Miami. But where the majority of crypto companies are based is probably the Bay Area. Where there’s a tremendous amount of institutional support for crypto is probably New York. And right behind that is Boston, including companies like Fidelity, (which has) 150 to 200 people exclusively dedicated to digital assets.
Breach is known for insuring individual consumers with its first product, Crypto Shield. What’s on deck for your next product?
There are startups and companies within the crypto space that need access to insurance. We help them get access to that insurance. Today we do that as a broker. And in the not-so-distant future we’ll be doing that as an underwriter.
Scams are also a huge problem in crypto. What does Breach do to help investors in this area?
We don’t insure against that, but what we do provide our insurers and generally for the broader market is a lot of content and education around how to avoid those. How to clean up your own personal hygiene as it relates to crypto and be aware of these things.
Earlier this year, President Biden issued an executive order asking the federal government to examine the risks and benefits of cryptocurrencies, including regulation and oversight. What’s been happening on that front?
There was a working group, but apparently that working group has paused its work. So it’s a non-working group right now. Ironically, we have a couple of advisers and investors that sit on the Hill that provide government strategy, support to politicians to create policies. We personally have met with the FDIC in the early days and my read was that it was going to be a little bit far away before we see anything related to that extending into crypto.
