Digital asset businesses are encountering new insurance requirements as regulators respond to recent crises. These firms face not only novel risks like wallet hacks (Crime Insurance) but also traditional liabilities requiring coverage (e.g. directors and officers (D&O) and professional liability/indemnity (PI).
Across Hong Kong, Singapore, the UAE, and Australia, authorities and industry experts are shaping insurance solutions – from warm storage crime policies to D&O coverage for listed companies – to safeguard the burgeoning digital asset sector.
Hong Kong’s regulators have moved swiftly to bolster virtual asset oversight. The Securities and Futures Commission (SFC) historically required licensed exchanges to maintain insurance for client assets in both hot (online) and cold (offline) wallets, [1] effectively mandating crime coverage for any warm-storage (hot wallet) theft. However, the industry has struggled with these mandates – few regional insurers will cover hot-wallet risks.
In response, the SFC is rethinking its approach. It plans to relax the strict 98% cold storage rule and align insurance standards with global norms to ease the compliance burden. [2]
As more digital asset firms seek public listings or integrate into Hong Kong’s financial markets, D&O cover for executives is coming into focus to guard against investor lawsuits and regulatory actions. Hong Kong is poised to update its insurance requirements, aiming to balance security with practical viability for crypto businesses. [3]
Singapore has introduced strict new rules on digital asset custody in the wake of global exchange failures. The Monetary Authority of Singapore (MAS) now requires digital payment token providers to segregate customer assets and keep 90% of client tokens in cold storage[4] , limiting hot-wallet exposure to 10%.
While MAS stops short of mandating insurance, these custody rules aim to minimize losses in a crisis. Recent events show that even segregation may not fully protect consumers, so many firms are voluntarily obtaining insurance for hot-wallet theft to cover that remaining exposure.
Although not required by law, D&O insurance is increasingly sought as digital asset firms partner with banks or consider public listings, to shield current or prospective directors from liability and to attract high quality candidates.
The UAE – particularly Dubai – is proactively integrating insurance into its digital asset framework. Dubai’s Virtual Assets Regulatory Authority (VARA) mandates that licensed crypto exchanges and custodians carry custody insurance, alongside professional indemnity, Crime, D&O and any other type of insurance as assessed by VARA to be appropriate for a Virtual Asset Service Provider (VASP) business.[5]
In practice, firms must insure client assets against hacks, theft, internal fraud, or even physical damage to storage media. Industry leaders report “urgent demand” for bespoke insurance as hundreds of new startups seek licensing in the Emirates.[6]
Going forward, the UAE is expected to keep these coverage mandates in place for virtual asset businesses. Regulators in Abu Dhabi and Dubai will likely refine the rules further, but comprehensive coverage of custody and management risks will remain a cornerstone. This approach underpins the UAE’s emergence as a global digital asset leader.
Australia is transitioning from a laissez-faire environment to a potential regulated regime emphasizing consumer protection. The Labor party released a new regulation plan in March this year proposing a new Digital Assets framework under existing financial services laws and has promised to tackle debanking. Under the proposed framework, Digital Asset exchanges, custodians and certain brokerage firms will come under the new laws. [7] Given the outcome of the recent federal election which took place on May 3rd, with Labor taking the win, this regulation plan is now likely to come to fruition.
The regime imposes similar compliance requirements as other financial services in the country, such as following rules safeguarding customer assets, obtaining an Australian Financial Services Licence (AFSL) and meeting minimum capital requirements. From an insurance standpoint this will lead to more comprehensive risk management frameworks practiced by organisations coupled with demand for various types of Financial Lines insurances, namely compulsory minimum levels of Professional Indemnity Insurance and increased demand for D&O, Cyber and Crime policies.
In summary, insurance is on track to become standard for Australian digital assets ventures – either mandated or adopted voluntarily to boost trust amongst peers, investors, clients and regulators – marking a maturing market where insurance underpins stability in the ecosystem.
As Hong Kong, Singapore, the UAE, and Australia refine their regulatory frameworks, a clear trend is emerging: compliance and risk management are becoming non-negotiable for digital asset firms. While each jurisdiction takes a unique approach, one thing is certain: companies that fail to meet rising security and governance standards will struggle to survive.
For firms operating in these regions, securing comprehensive insurance coverage, strengthening internal controls, and proactively engaging with regulators will be critical to long-term success. As institutional investors and financial giants continue to invest in the digital asset ecosystem, only businesses that demonstrate resilience, compliance, and robust risk mitigation strategies will gain a competitive edge. The future of digital assets will belong to firms that embrace transparency, invest in security, and adapt to the evolving risk landscape, transforming digital assets from a niche market into a trusted pillar of global finance.
WTW hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
