I tried to add my Monero (XMR) holdings to my “Digital Asset” insurance schedule. The underwriter, who had happily approved my Bitcoin and USDC, immediately rejected the XMR. “We cannot verify the chain of custody,” she said. “For all we know, you sent that money to a sanctioned entity.”
Key Takeaways
- Verification is Impossible: Insurance relies on “Proof of Loss.” With Bitcoin, you can show the insurer the blockchain ledger proving the funds left your wallet and went to a hacker. With Monero, the ledger is opaque. You can’t prove who controls the funds.
- Regulatory Risk (AML/OFAC): Insurers are strictly regulated. Paying out a claim on Monero could be seen as facilitating money laundering or violating sanctions (OFAC), as they can’t see the source of funds.
- The “Dark Web” Stigma: Insurers view Privacy Coins as high-risk assets used by criminals. This “Moral Hazard” leads to automatic denials.
- Exclusion Clauses: Policies often explicitly exclude “Anonymized or Privacy-Enhanced Currencies.”
The “Why” (The Trap)
The trap is “Auditability.”
Insurance is a contract of indemnity. To indemnify you, they must know exactly what happened. Privacy coins are designed to prevent anyone from knowing what happened. The tech that makes Monero great makes it uninsurable.
The Investigation (I Tested Services)
I tried to insure privacy coins with three providers.
Coincover
- Result: They do not support Monero. Their tech relies on monitoring keys and transactions. They can’t monitor XMR.
Evertas
- Result: Highly unlikely. They require “Chainalysis” integration to score risk. Chainalysis cannot effectively score Monero privacy transactions.
Self-Custody
- Result: The only option. You are your own insurer.
Comparison Table
| Asset | Auditability | Insurability |
| Bitcoin (BTC) | High (Public Ledger) | High |
| USDC (Stable) | High (Centralized) | High |
| Monero (XMR) | Zero (Private) | Zero |
| Tornado Cash ETH | Low (Mixed) | Low (Red Flag) |
Step-by-Step Action Plan
- Accept the Risk: If you hold XMR, realize $0 insurance is available.
- Atomic Swaps: If you need to “insure” the value, swap XMR to BTC using an atomic swap (no KYC). Then hold the BTC (which is insurable). Swap back when needed.
- [IMAGE: Diagram of an Atomic Swap process]
- Extreme OpSec: Use air-gapped computers. Generate seeds on dice. Physical security is your only insurance.
FAQ
Is holding Monero illegal?
In most jurisdictions, no. But exchanges are delisting it due to pressure.
What about Zcash?
If you use “T-Addresses” (Transparent), it acts like Bitcoin and is insurable. If you use “Z-Addresses” (Shielded), it is uninsurable like Monero.