Winklevoss-Led Gemini Exchange Now Has Its Own Insurance Company

[fillippone]

Gemini confirms himself as one of the most institutional money friendly exchanges, with a clear step in providing such client a safe ansd sound investment venue, providing them with an insurance for the funds held at the exchange.

Winklevoss-Led Gemini Exchange Now Has Its Own Insurance Company

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.

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."

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.

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[alyssa85]

Gemini confirms himself as one of the most institutional money friendly exchanges, with a clear step in providing such client a safe ansd sound investment venue, providing them with an insurance for the funds held at the exchange.

Winklevoss-Led Gemini Exchange Now Has Its Own Insurance Company

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.

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."

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.

It's interesting that they've created an insurance company, instead of just getting insurance from Lloyds of London the way Coinbase did.

I wonder if the plan is to get their insurance company to start offering insurance to other exchanges in return for a premium. The way insurance works is you pool the risks, so the more exchanges that get insured with them, the safer the whole ecosystem is, while not breaking anyone's bank.

[ChrisPop]

In my view the Gemini brothers are making some very smart moves in the industry.  I think their exchange is the single one that offers such a big insurance. A $200M is a sum that a few can cover - thus making the Gemini exchange - one of the major institutional grade for cryptocurrency trading.

[Wexnident]

Guess they'd be at the forefront now, with such a big step they took with insurance backed exchanges. Not only that, it's a big insurance they have right there, pretty much overwhelming any other exchange out there, whether it be insurance backed or not. Not only that, they directly avoided competition ( for now ) from coinbase with them handling cold storage wallets.

[Lucius]

~snip~

Security is something that should be good in any case, and in the case of something as sensitive as crypto it definitely gives additional security to clients. What may be a little unusual is that a company provides insurance on its own, through a company it founded. So the whole thing is actually related in the sense that they are actually guaranteeing money for insurance, which may not be a common business practice (although I may be wrong).

However, I agree that this move will encourage others to at least start thinking in that direction, which, if it becomes the standard, would mean a hell of a lot in terms of the security of the assets clients keep there.

But I will still wonder if this path leads to even more centralization in terms of coin hoarding (BTC) on crypto-exchanges? Given that we consider them insecure today (not our private keys - not our coins), and yet there are millions of BTC stored with them - will these figures increase further for added security in the form of insurance? One might wonder why anyone would risk having a desktop/mobile wallet or buying a hardware wallet if they could have a secure online option.

[BChydro]

Gemini confirms himself as one of the most institutional money friendly exchanges, with a clear step in providing such client a safe ansd sound investment venue, providing them with an insurance for the funds held at the exchange.

It is a ground breaking approach and the Winklevoss brothers were planning to do something for a very long time and because of regulatory hurdle they kept on shifting their focus and i think they have done a great deal of service to the community to make the authorities understand about bitcoin and now you get the insurance for the coins in an exchange and that is the service we want, a security for our money invested in exchanges should have insurance and i am sure the rest of the exchanges will follow this path if not they will loose customers.

[fillippone]

<...>
But I will still wonder if this path leads to even more centralization in terms of coin hoarding (BTC) on crypto-exchanges? Given that we consider them insecure today (not our private keys - not our coins), and yet there are millions of BTC stored with them - will these figures increase further for added security in the form of insurance? One might wonder why anyone would risk having a desktop/mobile wallet or buying a hardware wallet if they could have a secure online option.

This is I think the main point.
I think that for the moment better centralisation means better exchanges: a lot of present exchanges have subpar ores management, liquidity, security etc... so if higher centralisation is the price to pay I am ok with it. Also because I think it is a transition toward a more mature, hence competitive scenario for exchange: a lot of smaller exchanges have to die so the bigger one can compete in a more mature scenario, with users being the ultimate benefited of this.

Regarding holders remember that there are users, namely institutional investors that REQUIRE exchanges to be insured against every kind of mishaps in order to be used. So I think these are the subject the Winklevii has in mind when setting up all this, not the retail users.

Edit: will expand answer when RL duties settle a little bit!

[Broly46]

It is just a fraud!
Insurance are going to compensate you in USD.
Insurance will never ever going to compensate you in BTC
And look at the fine print hidden behind the wall of text of term and condition. It’s probably one of the plan Gemini intention to accumulate massive amount of BTC without buying it on the open market, and the idiot would fall for it.

[ChrisPop]

...
I think that for the moment better centralisation means better exchanges: a lot of present exchanges have subpar ores management, liquidity, security etc... so if higher centralisation is the price to pay I am ok with it. Also because I think it is a transition toward a more mature, hence competitive scenario for exchange: a lot of smaller exchanges have to die so the bigger one can compete in a more mature scenario, with users being the ultimate benefited of this.

Regarding holders remember that there are users, namely institutional investors that REQUIRE exchanges to be insured against every kind of mishaps in order to be used. So I think these are the subject the Winklevii has in mind when setting up all this, not the retail users.

Edit: will expand answer when RL duties settle a little bit!

I'd change that statement to: "better centralisation means better traditional exchanges." - institutional traders do need these insurance policies, but what if those can be met through well-written and audited smart contracts - and the auditors would hold the insurance for the smart contracts?

I strongly believe that in order to achieve a higher level of freedom & transparency we need decentralized services. Fortunately we do have the means for that - aka smart contracts. However if you look at the current DEXes in the market they are not completely decentralized thus the incentive to use them is not 100% if you know what I mean.

[gentlemand]

It is just a fraud!
Insurance are going to compensate you in USD.
Insurance will never ever going to compensate you in BTC

I presume it has to be that way. But that's how most insurance works. You get the dollar value of whatever is insured.

It would be interesting to see how clear they make this and the terms of any claim. Will the dollar value be frozen at the time of the loss?

As far as I know this is the first cold storage insurance. Full marks to the Winkies for sticking at it and continuing to innovate even if they may go against the beliefs of many.

[aoluain]

Gemini are sending a message out to the world that they want the big
investors and traders to use their platform.

Providing a robust insurance backing will put the "institutional investors"
at ease.

You do have to hand it to the twins, they are persevering in the crypto
space after their attempts to apply for Crypto ETF back in 2017 and
2018 were rejected by the SEC.

Their positivity can boulster other peoples belief that Bitcoin and crypto
is most definitely a long term thing, a very long term thing

[NeuroticFish]

But I will still wonder if this path leads to even more centralization in terms of coin hoarding (BTC) on crypto-exchanges?

I don't think it'll change much. Users already keep huge amounts of crypto in centralized exchanges, for various reasons, because most are thinking about hack that "it will not happen to me".
And insurance services offered by companies that understand crypto are needed imho.
Of course, some (like Binance) seems to do this more or less internally. So the question is indeed: will the twins "sell" this service or only use it for their own exchange?

[Broly46]

It is just a fraud!
Insurance are going to compensate you in USD.
Insurance will never ever going to compensate you in BTC

I presume it has to be that way. But that's how most insurance works. You get the dollar value of whatever is insured.

It would be interesting to see how clear they make this and the terms of any claim. Will the dollar value be frozen at the time of the loss?

As far as I know this is the first cold storage insurance. Full marks to the Winkies for sticking at it and continuing to innovate even if they may go against the beliefs of many.

Good luck dealing with insurance
The likelihood of them sticking to the terms of “pairing the value at the time of loss, paring the value to the market value you claimed the loss, pairing it to the time you buy it,  or whichever is lower among all options” is sky high, insurance would never ever give you a chance of profiteering. Say

value at time of loss $ 100,
value at the time claimed $ 110,
your purchase price $ 90,

insurance would compensate you $ 90 almost 99.9% of the time, out of three option,
And you can have no say when everything is stated on the tnc that’s not even there by the time you read that, they can modify the tnc at their wishes to best suit their position, that’s not an unusual practice to them, and it’s legal and incontradictible.

And I’m eager to see the time tested effect of this little experiment. Fund manager claim the loss, and prop up the value of BTC by buying from the open market? And loss again to the hack and claim the insurance and prop up the BTC again? And go back and forth for the third, forth fifth trials, to the point that someone gonna cry out loud “bitcoin is a fraud!”

[fillippone]

It is just a fraud!
Insurance are going to compensate you in USD.
Insurance will never ever going to compensate you in BTC

I presume it has to be that way. But that's how most insurance works. You get the dollar value of whatever is insured.

It would be interesting to see how clear they make this and the terms of any claim. Will the dollar value be frozen at the time of the loss?

As far as I know this is the first cold storage insurance. Full marks to the Winkies for sticking at it and continuing to innovate even if they may go against the beliefs of many.

Good luck dealing with insurance
The likelihood of them sticking to the terms of “pairing the value at the time of loss, paring the value to the market value you claimed the loss, pairing it to the time you buy it,  or whichever is lower among all options” is sky high, insurance would never ever give you a chance of profiteering. Say

value at time of loss $ 100,
value at the time claimed $ 110,
your purchase price $ 90,

insurance would compensate you $ 90 almost 99.9% of the time, out of three option,
And you can have no say when everything is stated on the tnc that’s not even there by the time you read that, they can modify the tnc at their wishes to best suit their position, that’s not an unusual practice to them, and it’s legal and incontradictible.

And I’m eager to see the time tested effect of this little experiment. Fund manager claim the loss, and prop up the value of BTC by buying from the open market? And loss again to the hack and claim the insurance and prop up the BTC again? And go back and forth for the third, forth fifth trials, to the point that someone gonna cry out loud “bitcoin is a fraud!”

An insurance contract has some terms, the terms of the payoff determine the premium paid.
If the terms are changed, in the jurisdiction where I live, this must be notified to you in adnvsnce, otherwise such changes are void.

The last scenario is fraud, hence is something illegal.
Remember those funds need to be  regulated and supervised if they want to be able to claim anything from Gemini.

[fillippone]

...
I think that for the moment better centralisation means better exchanges: a lot of present exchanges have subpar ores management, liquidity, security etc... so if higher centralisation is the price to pay I am ok with it. Also because I think it is a transition toward a more mature, hence competitive scenario for exchange: a lot of smaller exchanges have to die so the bigger one can compete in a more mature scenario, with users being the ultimate benefited of this.

Regarding holders remember that there are users, namely institutional investors that REQUIRE exchanges to be insured against every kind of mishaps in order to be used. So I think these are the subject the Winklevii has in mind when setting up all this, not the retail users.

Edit: will expand answer when RL duties settle a little bit!

I'd change that statement to: "better centralisation means better traditional exchanges." - institutional traders do need these insurance policies, but what if those can be met through well-written and audited smart contracts - and the auditors would hold the insurance for the smart contracts?

I strongly believe that in order to achieve a higher level of freedom & transparency we need decentralized services. Fortunately we do have the means for that - aka smart contracts. However if you look at the current DEXes in the market they are not completely decentralized thus the incentive to use them is not 100% if you know what I mean.

You are right, but it’s a very long way before a regulated fund can deal trough a DEX via smart contract. Keep in mind that now the can barely even touch real bitcoins (think of Bakkt volumes compared to CME, to have an idea).

[gentlemand]

And here's Gemini simultaneously coming up with the world's stupidest idea - https://twitter.com/Gemini/status/1218299327006810114

Who doesn't want to purchase Gemini's dollar with dollars to spend Gemini dollars in a handful of locations?

Awesome.

[fillippone]

And here's Gemini simultaneously coming up with the world's stupidest idea - https://twitter.com/Gemini/status/1218299327006810114

Who doesn't want to purchase Gemini's dollar with dollars to spend Gemini dollars in a handful of locations?

Awesome.

No reason to do that. Scratching my head

[NeuroticFish]

And here's Gemini simultaneously coming up with the world's stupidest idea - https://twitter.com/Gemini/status/1218299327006810114

Who doesn't want to purchase Gemini's dollar with dollars to spend Gemini dollars in a handful of locations?

Awesome.

It's easy to create tokens. It's much harder to fool enough people into buying them.

They want to get where Tether is. But they are doing it wrong. I think that they just don't have enough patience.

[gentlemand]

No reason to do that. Scratching my head

Maybe it's also a super rapid way to get onto their exchange, but it also seems like a super rapid way for them to freeze your account too. I would've thought somewhere that uptight wants nothing to do with cash.

Ah well. No one comes out with a constant string of winners.

[cotton ball]

And here's Gemini simultaneously coming up with the world's stupidest idea - https://twitter.com/Gemini/status/1218299327006810114

Who doesn't want to purchase Gemini's dollar with dollars to spend Gemini dollars in a handful of locations?

Awesome.

It's easy to create tokens. It's much harder to fool enough people into buying them.

They want to get where Tether is. But they are doing it wrong. I think that they just don't have enough patience.

Created new coin is most easy but how to make many people want to invest and buy coin looks hard and not easy, without get investor you must pay out much fees for listing on exchange market although you have one way how to make your coin popular like giving with airdrop project but keep needed money when you want to list on exchange market.