Winklevoss-Led Gemini Exchange Now Has Its Own Insurance Company
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Gemini, the crypto exchange founded by Cameron and Tyler Winklevoss, has created its own insurance company to protect clients against the potential loss of coins from its offline vaults – with a possibly record-breaking $200 million coverage limit.
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The Nakamoto captive completes Gemini’s insurance triumvirate. Firstly, U.S. dollar customer deposits are eligible for FDIC insurance (placed at third-party banks including crypto-friendly Silvergate) and covered up to $250,000.
The second part came with a SOC2 security audit carried out by Deloitte, which enabled Gemini to attain hot wallet cover for funds held on the exchange, a deal also brokered by Marsh.
Hussain said Gemini managed to acquire coverage for its hot wallets back in 2018 – when underwriters had very little appetite for that kind of risk – because of the audit and the ability to show it had no single point of failure.
Quizzed over the limits on offer for hot wallet cover, he said: “It has a different risk profile and our underwriters prevent us from disclosing the amount."
The second part came with a SOC2 security audit carried out by Deloitte, which enabled Gemini to attain hot wallet cover for funds held on the exchange, a deal also brokered by Marsh.
Hussain said Gemini managed to acquire coverage for its hot wallets back in 2018 – when underwriters had very little appetite for that kind of risk – because of the audit and the ability to show it had no single point of failure.
Quizzed over the limits on offer for hot wallet cover, he said: “It has a different risk profile and our underwriters prevent us from disclosing the amount."
I think this is big news, for a variety of reasons:
- Exchanges have been the weak link in bitcoin ecosystem for a long time. A lot of theft, hacks and losses have plagued exchange since Bitcoin inception, and a Darwinist push is a welcome news. Only exchange with state of the art practices should survive. And this is happening. The Vinklevii put some money, insight and long term vision in a relatively immature sector. They were well aware of the regulatory framework required by the big client: Wall Street. And the playbook is slowly resulting in a evolved framework to make them invest (safely invest, from a regulatory perspective) in Bitcoin.
- It is difficult for an exchange to insure himself. The big difference here is that the cold wallets are insured, as per industry standard, if any, only hot wallets are insured. So this is pushing the bar for the competition even higher
- This development is also helping the insurance market to open to this kind of business. Insurance of crypto assets is something that not every insurer can assess and price. With more and more players asking for those services, insurance companies must eventually come to a way to price such risks. Obviously a bigger and more competitive market means lower prices for exchanges to be insured, with client benefit.