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Gemini achieves insurance coverage for custodied digital assets

Posted: 4 October 2018 3:30 pm
News

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.



Standardising risks

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."

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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.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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