Gemini achieves insurance coverage for custodied digital assets
One small step for cryptocurrency; one giant leap for Gemini
An insurance policy for a cryptocurrency exchange that can cover customer assets being held isn't just something you take out. It's something you achieve with a lot of hard work, education and demonstration of security measures.
And Gemini has just achieved it, according to a 3 October press release.
Coverage was arranged by Aon and provided by "a global consortium of industry-leading insurers," the press release says.
It's a significant step for Gemini, and also solidifies the status of cryptocurrencies as digital yet, in a way, tangible assets which can be protected in various ways.
"Consumers are looking for the same levels of insured protection they're used to being afforded by traditional financial institutions," said Yusuf Hussain, Gemini's Head of Risk. "Educating our insurers not only allows us to provide such protections to our customers, but it also sets the expectation for consumer protection across the crypto industry."
Gemini isn't the first crypto custodian to secure insurance for customer funds. Australia's Custodian Vaults claims customer funds are insured, and many other exchanges have claimed some form of insurance on and off, although in many cases, their insurance wouldn't necessarily provide effective coverage for all customer funds.
And perhaps bolstered by demand from potential clients like Gemini, and the education provided by these prospective clients, insurers are also starting to explore the potential of digital asset insurance. Lloyds of London, for example, has broken into the space.
The growing prevalence of insurance solutions for the industry is a significant development because it goes a long way towards offsetting the risk of complete loss that many institutions still worry about and presents a measurable and quantifiable cost rather than an unknown risk.
It also helps cement standard security practises, which are still much needed in an industry prone to massive exchange hacks and the theft of tens of millions of dollars' worth of crypto.
Essentially, if insurance becomes a new standard for cryptocurrency exchanges, it will lift standards across the board. This is because complying with the terms of these policies and getting coverage will be dependent on exchanges maintaining a high standard of security. In this way, insurance might present an informal but quite effective set of security standards for exchanges.
Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.