Kenya’s insurance sector is preparing to cover cryptocurrency losses for the first time, a major shift in how the country approaches digital assets.
The Insurance Regulatory Authority has published draft regulations introducing virtual assets insurance as a new business class. This means Kenyans who invest or trade in cryptocurrencies like Bitcoin could soon buy insurance coverage protecting them against hacking losses, employee theft, fraud, and other risks that come with holding digital assets.
The regulator has assigned business class number 142 for virtual assets among Kenya’s 34 insurance subclasses, putting cryptocurrency coverage on equal regulatory footing with traditional insurance products. IRA says the move aims to promote emerging insurance products, improve consumer protection, and make insurance more inclusive.
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This development comes as Kenya has become a major player in the stablecoin market. The country transacted KES 426.4 billion in stablecoins during the year ending June 2024, according to blockchain data platform Chainalysis. That puts Kenya fourth globally in stablecoin usage, behind only Nigeria, South Africa, and Ghana.
Stablecoins are cryptocurrencies pegged to stable assets like the US dollar, making them less volatile than Bitcoin and other cryptocurrencies. Kenyans are increasingly using them for cross-border payments, remittances, and business transactions because they’re faster and cheaper than traditional banking channels.
The cost of sending stablecoins averages between 0.5 and 1%, compared to 4-7% for banks and services like Western Union.
Local traders use crypto to pay for imports, diaspora Kenyans wire money to families through digital assets, and multinationals are tapping stablecoins to repatriate billions of shillings while bypassing commercial banks. Even Elon Musk’s Starlink converts Kenyan shilling payments into stablecoins for repatriation to the US, where they’re converted back into dollars.
The insurance industry has historically been reluctant to cover cryptocurrency risks due to regulatory uncertainty and the frequency of major thefts. Large-scale hacks have plagued the crypto industry since its early days, raising serious security concerns.
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Crypto exchanges face risks from hacks, insider theft, and system failures, while companies holding digital assets worry about wallet breaches and smart contract vulnerabilities.
But the landscape is changing. The global digital-asset insurance market was valued at about $2.3 billion in 2023 and is projected to reach $3.5 billion by 2032.
International firms like Lloyd’s of London, Chubb, and specialized companies such as Evertas and Coincover have started offering crypto insurance, mostly focused on theft or loss of digital assets, including non-fungible tokens.
Despite a $3.31 trillion global digital assets market, only 11% of crypto holders currently have insurance coverage, according to credit rating agency AM Best. That gap is a massive opportunity for insurers willing to wade through the complexities of the crypto world.
