NFTs left uninsured in CNA's $20M trust policy

NFTs left uninsured in CNA’s $20M trust policy

CNA Insurance, one of the top commercial insurers in the United States, has made a significant move by excluding coverage for nonfungible tokens (NFTs) within a $20 million policy held by Schwab Strategic Trust. This decision was disclosed in a filing submitted to the US Securities and Exchange Commission (SEC). The exclusion clause explicitly states that the policy will not provide coverage for any losses, damage, claims, occurrences, or lawsuits related to NFTs.

In their filing, CNA Financial defines NFTs as follows: “Any unique digital identifier connected to any digital ledger technology which may be used to certify authenticity or ownership of anything, including but not limited to any digital, tangible, or intangible item, but cannot be substituted or exchanged for any similar item.” This definition makes it clear that any incidents involving NFTs will not fall under the protective umbrella of the insurance policy.

It’s worth noting that while NFTs are specifically excluded from coverage, the policy document clarifies that “cryptocurrency” is not encompassed within the definition of NFTs. This distinction is crucial in a financial landscape where both NFTs and cryptocurrencies have gained attention for their unique characteristics and potential risks.

NFTs, which reached peak popularity during the 2021 bull market, have experienced a notable decline in both prices and trading volume in subsequent years. On August 3rd, 2023, there was a marked drop in gas usage associated with NFT transactions, signaling a shifting landscape within the NFT market.

Despite this decline in interest, some notable figures and businesses remain engaged with NFTs. For instance, soccer star Cristiano Ronaldo announced his plans to release more NFTs in the future while participating in a lie detector test. This test was conducted to celebrate the launch of his second NFT collection in partnership with crypto exchange Binance.

In addition to celebrities like Ronaldo, businesses are also exploring NFTs in innovative ways. Lufthansa, a prominent airline, introduced an NFT app on August 31st, allowing users to scan their boarding passes to redeem NFTs. These collected NFTs can grant passengers access to rewards such as flight upgrades or lounge access, showcasing the diverse applications of this digital asset class beyond the art and entertainment sectors.

In conclusion, CNA Insurance’s decision to exclude NFTs from coverage in a substantial trust policy reflects the evolving nature of the insurance industry in response to emerging digital assets. While NFTs have experienced fluctuations in popularity, they continue to be of interest to both individuals and businesses looking to explore new opportunities within the digital economy.