FTX Crash Exposes Insurance Black Hole Hampering Crypto Recovery

A long road lies ahead to repair confidence in crypto after unprecedented bankruptcies and hacks, including the major challenge of giving investors a way of insuring against such events.

Stock brokerage accounts often come with some cover against outcomes like bankruptcy but digital-asset platforms provide few if any shields, a reality underlined by the November collapse of Sam Bankman-Fried’s FTX exchange.

Investors seeking such policies face a tough task. Traditional insurers are wary and crypto-native solutions in decentralized finance — or DeFi — account for a fraction of the $1.1 trillion digital-asset sector. For instance, funds locked in DeFi ...