Iran launches a Bitcoin-backed insurance service for ships crossing the Strait of Hormuz

Iran has launched Hormuz Safe, a new Bitcoin-backed insurance service for ships crossing the Strait of Hormuz, as Tehran turns one of the world’s busiest energy routes into a crypto-linked shipping product.

The service is meant for Iranian shipping companies and cargo owners, and the government says it could bring in more than $10 billion a year. The offer is simple on paper. A cargo owner accompanies a shipment, the insurance cover starts, and the owner gets a signed receipt.

Tehran says the full website for Hormuz Safe is still “coming soon,” but Iranian media says the platform has already started offering cover for maritime cargo moving through the strait. The program is expected to include different marine insurance products and encrypted vessel checks.

The big question is whether this insurance bill comes on top of transit charges. That matters because some ships have already faced payments of up to $2 million per trip through the same route.

Iran puts Hormuz insurance under a new Strait authority

On Monday, the Supreme National Security Council of Iran announced that a new organization, known as the Persian Gulf Strait Authority (PGSA), will be responsible for providing information regarding the strait. The authority must give live information about operations and new developments at the strait.

Iranian state-affiliated media reported that the Hormuz Safe will begin offering insurance services for the maritime transport of goods in the region. The service will also offer encrypted certification for vessels sailing through the strait.

According to the report, “cargo is insured starting from the moment of confirmation, with a signed receipt provided to the owner.” The Iranian government also added that the service is “for Iranian shipping companies and cargo owners.”

Iran said that it intends to use the proceeds from the tolling system to cover its cost of repairing damages resulting from nearly six weeks of US-Israeli bombing inside Iran. Before the conflict, ships could pass through the strait without paying a fee.

Both the US and China have opposed the tolling of the strait. Following his meeting with Chinese President Xi Jinping, the White House stated that “Xi made clear China’s opposition to the militarization of the strait and any efforts to toll its use.” No official denial has come out of China since then.

UN Secretary-General António Guterres has also called for the opening of the strait. He called for “no tolls” and “no discrimination.”

Shipping companies face higher Gulf insurance costs and sanctions risk

In addition, the insurance rates for vessels heading to the Persian Gulf are rising significantly. Indeed, the insurance war-risks for ships have become significantly more expensive since the beginning of the military operations nearly two and a half months ago.

For example, in March, the insurance rates increased by 5 times within several days following the US and Israeli air raids on Iran. This situation might make any simple voyage very troublesome.

Several leading insurance companies ceased their activities in this regard quickly enough. Gard, Skuld, NorthStandard, and the American Club refused to provide war-risk insurance for ships sailing in the Persian Gulf area as soon as the military conflict started.

Later on, a number of insurers returned to the market with state guarantees. For example, Chubb Limited has entered a $20 billion program in the USA providing insurance against war risks for hull, cargo, and liability coverage of commercial ships sailing in the Strait of Hormuz.

However, shipping companies are cautious with regard to this issue. Some of them continue avoiding navigation in this area due to possible attacks and kidnappings, the threat of vessel seizures, and crew safety issues.

According to a March Cryptopolitan report, Iran had already begun to take transit fees from some commercial ships at the start of the war. Some payments were estimated to reach $2 million per voyage.

In addition, the UN Convention on the Law of the Sea prohibits levying any payments on vessels passing through the international strait or territorial sea.

As of press time, no country or shipping company has expressed its interest in using the Iranian Hormuz Safe Service.

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