Deposit Insurance for Bitcoin? Posted by Association of Vermont Credit Unions on 12:56 PM

One of the biggest obstacles to virtual currencies like Bitcoin becoming widely accepted is the lack of the safety net of being insured like funds in a financial institution. As reported by American Banker a diverse group of entrepreneurs is trying to remove that difference from mainstream banking.

On January 9th one bitcoin provider started to offer bitcoin holders insurance through Lloyd's of London. Another Boston-area company plans to allow investors to insure bitcoins through derivatives trading. A New York insurance company has developed a product specifically to protect Bitcoin service providers from loss. Still other concepts focus on technology such as miniature hardware devices allowing users to store and access their bitcoins offline.

Federal regulations give stored-value and prepaid cards a path to insurance. Virtual bitcoins don't have anything like that and regulators aren't ready to classify how virtual currencies should be treated for purposes of deposit insurance, according to the American Banker story.

In the future, options for protection of bitcoins may depend on whether regulators and the public view them as actual money. Instead of currency, some view bitcoins as an investment with fluctuating prices.

Read the American Banker article in entirety.