Japan’s leading bitcoin exchanges, Bitflyer and Coincheck, will start offering insurance for merchants to cover failed transactions involving bitcoin.
Insurance for Bitcoin-Accepting Merchants
Two of Japan’s leading bitcoin exchanges, Bitflyer and Coincheck, are partnering with large Japanese insurance companies to offer merchants insurance to protect them from Bitcoin transactions that do not go through correctly, Nikkei reported. “Policies will cover losses from botched payments,” the publication described, adding that:
The hope is that more stores will adopt bitcoin as a payment method if they are not forced to simply eat such losses.
Since the Japanese government started recognizing bitcoin as a legal method of payment on April 1, a growing number of merchants have started adopting the digital currency.
Recently, Bitcoin.com reported on businesses in Japan’s number one electronics shopping district, Akihabara, accepting bitcoin. Both Coincheck and Bitflyer have continually been signing up retailers across Japan to start accepting bitcoin, such as Bic Camera and some popular capsule hotels.
Bitflyer and Mitsui Sumitomo Insurance
The Tokyo-based Mitsui Sumitomo Insurance Group (MSIG) is part of the MS&AD Insurance Holdings Group. Japan’s largest bitcoin exchange by volume, Bitflyer, has announced that it has partnered with the insurance company to offer merchants a way to receive compensation for failed Bitcoin transactions, Nikkei detailed, adding that:
The insurance package rolling out Friday will be the first of its kind in Japan.
This insurance “will cover damages if a customer payment does not go through correctly due to system problems or other issues,” the publication noted.
This is not the first time Bitflyer has worked with MSIG. In November 2016, the two companies started co-developing “Japan’s first cyber insurance policy for Bitcoin businesses,” they announced at the time. The two “have collaboratively created a special insurance package with comprehensive compensation for Bitcoin businesses for risks associated with cyber attacks,” they described. The policy covers a wide range of damages incurred from the theft and disappearance of bitcoin following cyber attacks, as well as other support services.
“The total coverage, ranging from 10 million yen ($89,000) to 1 billion yen, will be offered against damages and losses caused by cyber attacks and other unauthorized accesses, as well as mistakes and impropriety by employees,” Nikkei reported at the time.
Coincheck and Tokio Marine & Nichido Fire Insurance
Another leading Japanese bitcoin exchange, Coincheck, is also preparing to offer a similar insurance product by teaming up with Tokio Marine & Nichido Fire Insurance, a property and casualty insurance subsidiary of Tokio Marine Holdings, according to Nikkei.
Earlier this month, Coincheck announced a different insurance product through the same Tokio Marine & Nichido Fire Insurance company. This insurance would compensate Coincheck users up to 1 million yen in case of “unauthorized login to user account.” The exchange said that this type of coverage is the first of its kind in Japan.
“We will indemnify damage incurred by unauthorized login to a user account that has set up 2-step authentication on the virtual currency exchange ‘Coincheck’ that we operate,” the exchange announced at the time, adding that “we will pay up to 1 million yen as compensation amount per request.”
Other Insurance Options
A few different types of insurance covering Bitcoin transactions already exist. However, they are third-party services, and not offered by the exchanges providing merchant processing solutions. Often, merchants are not aware of these services at the time they sign up to start accepting bitcoin.
GAP600, for example, is a US-based insurance underwriter used by Shapeshift, Cubits and Coinify. Founded in 2015, the company underwrites Bitcoin transactions for merchants, developers and service providers to allow zero-confirmation transactions, according to its website. GAP600 describes its product as an insurance service that “bridges the time gap from the published transaction on the Bitcoin network to the moment it joins the blockchain, by immediately confirming Bitcoin transactions even before they reach the block chain and are included in a mined block.”
Blockcypher offers another type of insurance for zero-confirmation bitcoin payments, which the company bundles with its confidence factor scoring system. Although their affordable API-driven service can help merchants decide in real-time if transactions are risky, the added insurance only covers payments up to $9 in value.