Investors Favor Market-Based Security Over Legal Protections for Cryptocurrencies

Market-Based Crypto Safety Improvements Preferred Over Regulatory Measures by Investors, Survey Finds

A recent survey conducted across nine countries has revealed that market-based enhancements to cryptocurrency security hold greater appeal for cautious investors venturing into digital assets compared to stricter regulatory measures.

The study, titled “Securing the Future of Cryptocurrencies 2023,” was carried out by Coincover, a company based in Cardiff, Wales, specializing in blockchain protection services. Among the 16,316 participants in the March poll, which encompassed Australia, Canada, France, Germany, Japan, Singapore, the United Arab Emirates, the United Kingdom, and the United States, 38% considered insurance against theft and loss to be the most effective confidence booster in the cryptocurrency space. Approximately 17% of respondents identified as crypto users.

Enhanced cybersecurity emerged as a close second at 37%, with 31% of participants prioritizing the ability to recover lost private keys and accounts as a key factor in building trust. In contrast, the need for stricter regulation received mention from only 26% of respondents, with those between the ages of 18 and 34 showing the least interest. Notably, improved cybersecurity exhibited little variance among different age groups.

The study noted that the most substantial deterrent to cryptocurrency investment was its perceived volatility and financial risk, as cited by 36% of participants and 41% of those aged 55 to 74. This could reflect the shorter investment horizons of individuals nearing or in retirement, who tend to favor less risky assets such as bonds over the more volatile stock market. While cryptocurrency has been steadily decreasing in volatility, it still remains considerably more volatile than equities.

The study’s findings also highlighted hacking and security concerns as the second most significant barriers to investor participation, with 33% of respondents expressing concerns in this regard. Notably, cryptocurrency hacks in the preceding year had reached a record total of $3.8 billion, according to Chainalysis, a notable increase from the previous year’s $3.3 billion.

Furthermore, the survey revealed that investors expressed significant distrust of cryptocurrency exchanges, with only 23% indicating a high level of trust, the lowest trust rating among various financial service providers. This skepticism was particularly pronounced among investors aged 55 and older, with fewer than 10% expressing confidence in exchanges. In contrast, commercial banks and money-transfer businesses were viewed more favorably, with 43% of respondents expressing high levels of trust.

Coincover suggested that retail investors place greater emphasis on confidence rather than trust, highlighting the idea that market-driven factors are a more effective means of attracting them to cryptocurrencies than regulatory and government-led initiatives. David Janczewski, CEO and co-founder of Coincover, indicated that many investors could stand to benefit from incorporating modest positions in digital assets within their portfolios, despite the associated risks. He recommended allocating only “a few percentage points” of overall assets to cryptocurrency.

Coincover employs technology to proactively prevent issues within the cryptocurrency sector, and it also maintains insurance coverage through Lloyds of London to safeguard customers in case of losses.