Can Crypto Hacks Become Insurable?
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In 2025, crypto crime did not disappear but it did become more expensive.
Per PKware, more than 200 significant crypto security incidents globally last year. Chainalysis claims that crypto theft for the full year 2025 pushed an all time of $6.75 billion. Despite years of advances in crypto, the underlying risk profile of digital assets has remained difficult to insure.
When crypto defenses fail, losses are usually final.
That reality has shaped the insurance market. Coverage exists, but premiums are high, limits are low, and exclusions are common. For insurers, the challenge has not been detecting risk but pricing it. Most crypto systems offer little ability to contain damage once an attack begins, leaving underwriters to assume worst case outcomes.
A system launched this month by Circuit is testing whether that assumption still holds.
Why Crypto Risk Has Been Hard to Insure
Crypto security has focused primarily on prevention. Tools such as multi party computation, multisignature wallets, and hardware security modules aim to prevent unauthorized access in the first place. These approaches have reduced certain classes of attacks, but they have not changed the core issue insurers face.
Once a valid transaction is initiated, there is typically no way to stop it.
This differs from traditional financial systems, where fraud detection, transaction holds, and reversal mechanisms allow losses to be limited even when controls fail. Those containment capabilities are what make financial crime measurable and insurable.
Crypto has largely lacked that middle layer between breach and loss.
Chainalysis has improved post-incident investigation and recovery efforts. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
NurPhoto via Getty Images
Blockchain analytics firms including Chainalysis and TRM Labs have improved post-incident investigation and recovery efforts, but those tools operate after funds have already moved. From an underwriting perspective, visibility without containment offers limited value.
Circuit and the Case for Real Time Containment In Crypto
Circuit’s newly launched Response system is built around a different premise. Instead of assuming loss is inevitable once an attack begins, it targets the brief window between detection and transaction finality.
The system uses preauthorized fallback transactions and automated broadcast mechanisms to move assets to safety within seconds of detecting suspicious activity. Circuit says Response can operate in under two seconds on major blockchains including Bitcoin and Ethereum.
The company recently completed the Lloyd’s Lab Accelerator and received early backing from the Lloyd’s Central Fund, signaling interest from the insurance market in whether this approach can change how crypto risk is priced. Lloyd’s is the world’s leading insurance and reinsurance marketplace, providing innovative insurance solutions that protect people, businesses and communities worldwide.
“We’re proud to have backed Circuit through the Lloyd’s Central Fund,” said Rosie Denée, Head of Innovation and Commercial Education at Lloyd’s. “We look forward to seeing this deliver real value to the market.”
According to Circuit, institutions using Response may qualify for insurance premium reductions of up to 15 percent. More significant than the discount itself is the data generated. Real time containment produces measurable outcomes such as response success rates, partial loss avoidance, and recovery probabilities. Those metrics are essential for underwriting.
As digital assets move further into regulated markets, recoverability is becoming a prerequisite rather than an enhancement. Boards, regulators, and risk committees increasingly expect systems where failure does not automatically result in total loss.
What Skeptics and Competitors Will Argue About Crypto
Not everyone is convinced that real time containment solves the insurance problem.
Critics point out that attack detection is imperfect and that response mechanisms may fail under adverse network conditions. Blockchain finality varies by chain, and sophisticated attackers may attempt to disable or outpace automated defenses. There are also governance questions around pre authorized transactions and how they are controlled.
Competitors are approaching the problem from adjacent angles. Custody providers such as Fireblocks, BitGo, and Anchorage Digital continue to focus on reducing attack likelihood through governance and access controls. Monitoring firms emphasize faster detection and intelligence sharing. None, however, offer native onchain containment once a transaction is in motion.
Whether Circuit’s approach becomes a new category or remains a niche solution will depend on performance over time. Insurers will require sustained evidence that losses can be meaningfully bounded, not just theoretically reduced.
The Broader Crypto Shift
Still, the direction reflects a broader shift. Crypto security is moving beyond stronger locks toward survivability. If losses can be measured and contained rather than assumed to be total, the insurance market may finally have a foundation it can work with.
For crypto to scale institutionally, failure has to be survivable. This is one attempt to make that possible for crypto.
