Going Above and Beyond

Cred leads with most comprehensive risk management and insurance of any crypto-lending platform

7 min readJun 4, 2019

By: Dan Schatt, Co-Founder and President of Cred

At Cred, we love to geek out on the dry stuff — security, compliance, risk management, legal, and regulatory matters. We also care immensely about the company we keep — the partners and vendors we work with to keep our customers safe. Our customers, employees, investors, friends, and family entrust their digital assets with Cred and everyone who works at Cred feels an enormous sense of accountability and responsibility to ensure assets are well protected during the entire lending and borrowing lifecycle. Many of us worked together at PayPal and felt the same responsibility to ensure we built a product that our own families would use.

Crypto is still in many ways the wild west when it comes to the fundamental safeguards most of us have come to expect when ensuring the protection of financial assets. Cred is on a mission to dramatically improve that by working hard to secure the crypto lending industry’s most comprehensive set of risk management, information security and insurance protections available. If the worst happens and Cred loses customer funds, customers deserve certainty that they will be made whole.

Let’s start with crypto insurance.

Cred works with custodial partners that extend insurance, but we believe it is not enough to simply leverage the insurance of custodial partners. We are serious about protecting client assets and wholeheartedly believe we have an obligation to take a leadership role to go beyond today’s status quo to obtain as many insurance and risk management protections as possible. We hope this will spur more crypto lenders and borrowers to dedicate the time and resources to do the same.

Cred’s search for comprehensive insurance started with a review of the very best insurance brokers that have significant experience with crypto and financial services underwriting. How does one choose the very best crypto insurance? It starts with the very best insurance broker. Cred narrowed its selection criteria to the top 10 insurance brokers in the world, and chose Lockton, the world’s largest privately owned, independent insurance brokerage firm in the world with 52,000 clients and ranked #1 in Client satisfaction for commercial insurance by J.D. Power.

We selected Lockton in part due to their competency in crypto, cybercrime and financial services. Through Lockton, Cred narrowed its selection to ‘A’ rated insurance companies, known for strong financial reserves, claims payment history, business focus, and company structure. We reviewed ratings from AM Best, a global credit rating agency with a unique focus on the insurance industry. Best’s Ratings, which are issued through A.M. Best Rating Services, Inc., are a recognized indicator of insurer financial strength and creditworthiness. Cred ultimately selected one of the largest underwriters in the world, with over 100 years of experience and active in about half the countries around the globe, and received a minimum coverage of two million dollars. As a result, we are proud of the fact that Cred has some of the most comprehensive insurance policies of any crypto financial services platform, spanning errors and omissions (E&O), Cyber and Regulatory claim coverage — even Cred’s LBA token has coverage.

How did Cred secure asset insurance?

First, it’s important to know that it’s just as difficult to be selected for coverage as it is to select an insurance underwriter. Why was Cred selected by underwriters for insurance coverage? Cred was evaluated against several criteria, including:

Financial Condition. Underwriters typically require a company’s audited financial statements in order to determine its financial health. Cred has secured hundreds of millions of dollars of lending capital and is supported by the largest crypto exchanges in the world. Underwriters also evaluated Cred’s strong financial statements, resulting from making its product and utility tokens available to thousands of customers across over a hundred countries.
Business activities. Insurance underwriters have historically viewed crypto financial services as a nascent and highly risky industry full of bad actors. Cred’s licensed and well-documented business activities have helped underwriters become comfortable offering coverage. Cred activities include association with a list of highly reputable strategic partners that range from traditional fortune 500 companies to leading digital money platforms, crypto exchanges, and stablecoin providers. As a founding member of an Alliance of top tier blockchain companies including Brave, Bittrex, Blockchain at Berkeley, CertiK, Cred has had the opportunity to share best practices with its partners and grow quickly as a crypto financial platform. Cred’s business practices have also received high praise from Uphold and Cred is now working with the California Assembly to support the introduction of new blockchain legislation.
Quality of management and industry experience. Insurers care immensely about the qualifications and professional experience of a company’s executive team. Cred’s team has been reviewed by underwriters, regulators, auditors, and partners. Our executive team stands out for its depth of experience in blockchain, financial technology, lending, and capital markets. Cred’s leaders come from PayPal, Blockchain at Berkeley, Goldman Sachs, Prosper, Tradeshift and several companies who are known for having a high bar for talent and deep experience handling customer funds. Cred has been cited for its management expertise by Binance Labs, Tron, Bitcoin.com to name a few.
Regulatory and Compliance history. Underwriters look for evidence of good compliance policy, as do regulators, and as a California based company, Cred is a licensed lender, operating in a majority of US states. Cred has never run afoul of any regulatory requirement and frequently engages with regulators proactively.

Cyber Insurance

One of Cred’s priority areas was cyber insurance. Security and protection of client funds will remain our top priority. Cred’s comprehensive cyber policy covers network security failure, cyber extortion, data recovery costs, ransomware, forensics, reputational harm, business interruption, and system failure. We believe it is particularly critical to focus on employee training related to privacy and data security and we’ve financially supported our employees to pursue advanced degrees in Cybersecurity Strategy and Information Management, the same content offered to homeland security officials and private sector security specialists.

Regulatory Insurance

Cred’s insurance coverage extends to privacy breaches and computer system security breaches. Cred also devotes significant time and resources to support user education. Cred’s policy also covers privacy notifications and claims brought by any regulatory or administrative agency.

Cred’s underwriters also extended coverage to cover the costs of data privacy notification which also includes coverage of PCI fines, expenses, and costs and claims brought by any regulatory or administrative agency or bureau or any other quasi-governmental or self-regulatory entity. Cred’s partners take comfort in these policies, knowing that those claims are generally brought by individuals and companies whose information has been compromised, by regulators and sometimes law enforcement entities.

Errors and Omissions Insurance

Errors and Omission or “E&O” refers to the financial services industry’s version of professional liability insurance. This insurance comes in the event a customer or stakeholder holds Cred responsible for a service that it failed to provide or did not have the promised results. These services include the borrowing of crypto from a client related to the terms and conditions of a Cred Agreement and the granting of business or consumer lines of credit against crypto assets.

Cred’s insurance policies cover product failure, meaning the inability of customers to access or otherwise utilize Cred’s intended service. The coverage also extends to the LBA token, fiat currencies, viruses or any malicious code, script, worm, Trojan horse or similar software intentionally designed to enter or insert itself into computer memory or storage media and spread itself from one computer to another. The policy also extends to any wrongful act or product failure in the rendering of Cred’s professional services.

This comprehensive insurance coverage provided to Cred is a testament to the confidence Cred’s underwriters have in Cred’s ability to demonstrate to financial regulators that it has sound policies and procedures and adequate supervision. Underwriters reviewed personnel experience, independent third-party reports and conducted specific due diligence to make the policies available to Cred.

Cred avoids risky lending segments

All companies receiving loans from Cred have strong, well-established track records and proven cash flows. Cred’s lending portfolio is diversified across the US, Europe, and Asia and crypto assets are hedged to manage market volatility. Cred lends on a fully collateralized and guaranteed basis to and Cred does not lend to short sellers. We believe this an important point since short sellers work against the interests of Cred’s Earn customers, who are holding their crypto assets with the expectation of long-term appreciation. In addition, crypto short sellers tend to be under-collateralized and generally have significant credit exposure.

Protection Does Not Stop Here

Cred’s interest in protecting its customers extends to how it encrypts its data, the compliance and security vendors Cred chooses to work with and the architecture of our systems. If you have any questions about Cred and its commitment to security, compliance and risk management, please do not hesitate to connect with Cred at support@mycred.io and a member of Cred will be happy to discuss.

Thank you for your trust in Cred. We intend to earn your trust every day.

About Cred
Cred is a decentralized global lending platform that facilitates open access to credit anywhere and anytime. Founded by former PayPal financial technology veterans, Cred has secured over $300 million of lending capital with offices in San Francisco and Shanghai. Cred’s mission is to harness the power of blockchain to allow everyone to benefit from low-cost credit products. Cred brings together a diverse team of entrepreneurial leaders, machine learning, and the power of blockchain technology.