Gemini, a compliance-oriented cryptocurrency trading platform owned by the Winklevoss brothers, has established an insurance company to insure cryptocurrencies it custodies on behalf of clients up to $200 million USD, according to a blog post.
The new company, Nakamoto Ltd., will also sell insurance to customers of Gemini’s custodial services and allow them to insure their own holdings for the same amount.
This particular service, Gemini’s head of risk Yusuf Hussain says, will help Gemini’s institutional customers meet their own obligations around safe custody.
Hussain told Cointelegraph that the launch of Nakamoto, “is consistent with Gemini’s approach of being a security-first, compliance-first, and regulatory friendly exchange and custodian.”
The launch of Gemini’s captive insurance brokerage is reportedly “aided” by established insurance firms Aon and Marsh.
Gemini began offering custody of “cryptoassets” in September. Because cryptocurrencies can be difficult to manage, and because there have been many hacks and thefts, solid crypto custody is seen as a major sticking point with regards to “taking cryptocurrencies mainstream.”
Traditionally, cryptocurrency fans are very tech-savvy and skeptical of the fiduciary capacity of governments and big banks. As a result, they are usually very motivated to manage the risks involved in holding, sending and receiving cryptocurrencies.
Bitcoin, for instance, is a “push-payment” system in which only senders can induce a transmission. Bitcoin’s push system also means that mis-sent coins cannot be recovered unless the receiver sends them back upon request.
This feature requires very careful management of sending and strict replication of long alphanumeric “wallet addresses.” Even one mistake to a character in wallet address can mean permanent loss of funds.
Crypto trading platforms, desktop, and mobile software wallets -and even the software for offline hardware wallets- have been hacked by parties who seem to regard crypto more or less as money lying around on the Internet.
Because of the frequency of losses to date, insurance is a no-brainer for any fiduciary seriously considering crypto.
Regarding Nakamoto, Gemini president Cameron Winklevoss commented, “Obtaining meaningful insurance in the crypto industry remains a challenge, and our captive will help to increase our insurance capacity and move the industry forward.”