How Does “Insurance” Mitigate the Financial Risk of Crypto Custody?

Insurance, specifically crime and specie insurance, can provide a financial payout to a custodian or client in the event of theft, loss, or destruction of the held crypto assets. It does not prevent the custody failure itself but transfers the financial consequence of the loss from the client/custodian to the insurer.

Coverage is often complex, limited, and subject to strict security requirements.