Winklevoss-Led Gemini Exchange Now Has Its Own Insurance Company

[Hallmader]

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.

The point is more than that. Giving away airdrops or bounties does not make a coin grow. Listing on top exchanges does not make the coin attractive to investors either. What makes a coin really grow and be interesting to investors and the whole crypto community is the product, which is truly helpful and innovative and is addressing a problem in real life.

[bitgolden]

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.

Maybe Gemini safe and sound investment venue but definitely not for all the people across world. I wonder Gemini has been into exchange business but not willing to expand their business out of America. Binance comparatively started late but trying to cover almost all the continents for fiat options for crypto trading. I mean to say whatever development Genimi is achieving or going to achieve in future, will not have big impact into this crypto space as they are doing business only for USA people and not exactly for crypto community. Please remember USA covers less than 5% of crypto adopters.

If I were Winklevoss and I would have invested into bitcoin in millions by 2010/2011, I might have built a facebook rival platform or might be owning a business in crypto space which would be ranking top in sector after experiencing peaks in 2013 and 2017.

[Lucius]

~snip~

Of course, their move certainly makes sense when it comes to institutional investors, they seek security above all, especially in something that is still pretty insecure or, better to say, very vulnerable in terms of various manipulations or exit scams/unfortunate circumstances (QuadrigaCX recently or Mt.Gox in past).

I know a few years ago that the news came out about a Japanese insurance company, but I do not know if this project succeeded in its intention. However, I think regular insurance companies are seriously analyzing the crypto market and want to get involved. Allianz spokesman says "the company was exploring product and coverage options in the space because cryptocurrencies were “becoming more relevant, important, and prevalent on the real economy.”

Therefore, it is possible that such services will be extended in the future the retail users, but maybe only when crypto becomes much more valuable than today in terms of total market capitalization (which by the way we know that doesn't make much sense). But it will be hard to ignore something worth $1 trillion (BTC at $50k), everyone will want their share of the cake.

[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.

Maybe Gemini safe and sound investment venue but definitely not for all the people across world. I wonder Gemini has been into exchange business but not willing to expand their business out of America. Binance comparatively started late but trying to cover almost all the continents for fiat options for crypto trading. I mean to say whatever development Genimi is achieving or going to achieve in future, will not have big impact into this crypto space as they are doing business only for USA people and not exactly for crypto community. Please remember USA covers less than 5% of crypto adopters.

You have to understand why Gemini was set up in the first place. The Winklevoss brothers bought bitcoin really early, and their initial idea as to set up an exchange traded fund with those bitcoins, and list it in the stock exchange so institutional investors could buy.

Their ETF idea was rejected by the SEC which gave them a long statement of reasons - chief among them was that it was difficult to set the price of bitcoin because most of the exchanges at the time were shady and opaque and manipulating both price and volume. In 2013 when they first tried for an ETF, 90% of the trading volume was Chinese on no-fee platforms, and it was clearly fake volume, which meant the prices were likely fake as well. And people were worried about Mt Gox, rightly as it turned out.

So the Winklevoss twins tried to address this by setting up their own regulated exchange. They spent millions getting a New York licence. They did everything by the book, complied with every single regulation that was in existence in the US. The thinking was that as regulations tightened, their exchange would gain in volume because they were already compliant, and at some point, the regulated exchanges would be the ones setting the price.

They're not there yet, and they have plans to open regulated exchanges in Europe:

https://bitcoinist.com/crypto-exchange-gemini-eyes-european-expansion/

But they are very much bent on doing this by the book - they want to be the dominant exchange in all regulated areas because they believe that regulation is going to spread. And at that point they'll open their ETF.

Binance by contrast takes a wild west attitude to things - but who knows how long they'll last?

[gentlemand]

Maybe Gemini safe and sound investment venue but definitely not for all the people across world. I wonder Gemini has been into exchange business but not willing to expand their business out of America. Binance comparatively started late but trying to cover almost all the continents for fiat options for crypto trading. I mean to say whatever development Genimi is achieving or going to achieve in future, will not have big impact into this crypto space as they are doing business only for USA people and not exactly for crypto community. Please remember USA covers less than 5% of crypto adopters.

Binance are throwing a mountain of shit at the wall and hoping something sticks. In a year or two their services might all be gone or look totally different.

Gemini are taking the opposite approach. They're being careful and methodical. They may take time to arrive in other places, they are in a few, but if they do it'll be rock solid.

[The Sceptical Chymist]

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

Interesting but not surprising to me.  They're entrepreneurs at heart and their thing is to start businesses and be independent, but I have to say that breaking into the insurance business has got to be one hell of a challenge, since there's so much competition.  Though I admire their drive, I'm thinking it might have been smarter for them to purchase insurance for their customers instead of trying to make a new business out of it. 

Still, I think it's a really good thing that they're actually protecting their customers' money.  That's far more than can be said for many other exchanges.

I wonder if the plan is to get their insurance company to start offering insurance to other exchanges in return for a premium.

Could be.  I don't know what they think about Warren Buffett, but he was always big into insurance companies.  They all get the cash up front and then only later do they have to pay anything out, which is smart.

[Broly46]

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.

Yeah notify your customer, it’s what the KYC in crypto are setup, and do you wonder its fair to implement KYC in that manners? I bet nobody like KYC. Also Mt Gox is yet another superb example, they basically bend every single rules to not pay the amount you deserve, either you give up or they get screwed, they would drag as long as possible since they have the last say to every decision to be made. You can blame “scam, inequality, discrimination, racist, basic rights, cry to your mum lap, or threaten to expose their secret.”

[coinfinger]

These guys started off as the guys who mark zuckerberg stole from and came such a long way from it, at least here. I know out there in the world many people know them as the twins that zuckerberg stole from to this day, but if you are in crypto world you have heard their names related to crypto for years now. They are one of the earliest rich people to actually end up into bitcoin, they could have done nothing and just waited and sold at peak 20k prices and would have enough money to be super rich forever (like at least 3 generations rich) if they were just contempt with what they have but they went out to do many other things.

Gemini is a great example of that, now they are adding insurance company to that and making it even bigger, I hope many many successful business to them because they believed in bitcoin when no other rich person did.

[gentlemand]

Gemini is a great example of that, now they are adding insurance company to that and making it even bigger, I hope many many successful business to them because they believed in bitcoin when no other rich person did.

I would love to know whether Gemini has actually made them any money yet. Banking charters, staff, development, legal costs and so on add up to a vast outlay.

They're fine of course due to their personal holdings but I wonder what their time frame is for recouping and making actual profit.

[fillippone]

Gemini is a great example of that, now they are adding insurance company to that and making it even bigger, I hope many many successful business to them because they believed in bitcoin when no other rich person did.

I would love to know whether Gemini has actually made them any money yet. Banking charters, staff, development, legal costs and so on add up to a vast outlay.

They're fine of course due to their personal holdings but I wonder what their time frame is for recouping and making actual profit.

I don’t think they are in the money yet with their investment: the twins are definitely realising the bar for the exchange ecosystem as they are interested in the clients with deep pockets: institutional institutional money committed paying higher fees to be serviced by a sound counterpart, dealing with all the nasty stuff like compliance, regulations, KYC/AML proofing all their clients etc. (Almost the opposite of the way retail customers reasons and operate).
Setting up this kind of operations has a huge initial cost, that can be very effectively be amortised as the client base expands (once you setup a decent KYC/AML procedure, you can easily scale to 10 or 100 clients with little increasing cost).
As I think they are aiming to be the number one broker in the street once bitcoin has gained momentum, I would be surprised Ifcthey had already broke-even.

[fillippone]

Alow me to derail this thread for a second to understand, by comparison, how different Gemini is to other exchanges.

Brief Recap on Poloniex:

Poloniex launched in January 2014 and quickly became one of the largest exchanges in the world. During its early years, Poloniex thrived in a largely unregulated market. During 2016 and 2017, Poloniex handled a lot of altcoin trading. But by late 2017, Poloniex was plagued by support issues and was having trouble scaling quickly enough to cope with its new users.

Poloniex was acquired by Circle in February, 2018, with plans to work with regulators and improve Poloniex’s infrastructure. Those plans had a dramatic effect, as Poloniex’s BTC and ETH holdings began to plummet immediately after Circle’s acquisition. By October 2019, Circle announced that they were spinning out Poloniex as a separate entity. Poloniex officially ended support for US customers in November 2019 (and subsequently dropped KYC requirements for accounts with balances of less than $10k), sending their on-chain supplies to their lowest levels since January, 2016.

Source: Coin Metrics' State of the Network: Issue 34

The reported news is this one:

Poloniex Drops KYC for Withdrawals Below $10,000 Following US Exit

Poloniex has introduced a new type of account that allows users to withdraw as much as $10,000 a day without completing know-your-customer ("KYC") verification.

The exchange said in a blog post Thursday its new "Level 1" accounts will only require users to register with an email address and password. "Any customers who sign up from here on out can begin trading in seconds with a Level 1 account," according to the post.

Level 1 users can deposit and trade an unlimited amount of cryptocurrency. They can also withdraw a maximum of $10,000 every day. There are also opportunities to stake proof-of-stake (PoS) coins on the platform.

So basically Poloniex is going into the opposite direction of Gemini. Instead of seeking the big, fat Wall Street clients, they are luring the sleek,   thin and shady KYC avoiding clients. THose are the clients are ready to use different exchagnes because a 0.01% reduction in the fees. Not a smart choice in my humble opinion.
Also given the fact that, apparently, no one gives a f...k about KYC or privacy in bitcoin (big statement, don't discuss here, as really out of scope).

Hypothetical quiz:
A hacker discovers a way to determine with 100% certainty the ownership of all bitcoins in existence. Anyone in the world can know how many satoshis you have.
What will you do?

https://twitter.com/saifedean/status/1215759134726987786?s=20

[audaciousbeing]

The level of entrepreneurship of these guys should really be a subject of study in the entire industry because they see a spot and come in to make some real money. I don't understand how you can create an insurance to insure your own personal business which then means the exchange site would have to start paying insurance premium to their 'insurer' or find a way to transfer the cost to their customers and this money still goes to the pockets of the owners of the exchange site. Setting up an insurance company is not a joke like the way these guys have made it seem. Who decides their capitalization threshold, who decides how the premium will be calculated or how the customers will be indemnified. So far its meant for their exchange sites alone, its just another way to siphon funds...

[Hydrogen]

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.

They didn't mention if security audits will become a standardized practice to qualify for crypto insurance. It could elevate overall security standards and prevent disasters like Quadriga whose CEO passed away unexpectedly while being the only one able to access their funds private keys. It could also cut down on scams and inside jobs as insurers would be incentivized to investigate the disappearance and theft of capital before covering losses.

Coinbase has said it has $255 million in coverage of assets held in online, or hot, wallets, whereas the new Gemini policy is for cold storage. Other large crypto insurance offerings were previously reported by insurance brokerage Marsh’s Blue Vault, which provided $150 million for coins kept in cold storage.

It appears other exchanges already carry insurance protection. Nice to know. It legitimizes the industry and will help alleviate concerns over the new and emerging technology. Banks in the USA having FDIC insurance and banks abroad having similar protection schemes in place may be somewhat inadequate and obsolete. But they do inspire confidence, which is important, I guess.

Some in the crypto space have suggested that operating a captive is really the same as self-insuring. However, Hussain said Gemini’s belt-and-braces approach to regulation (the exchange holds a Trust License from the New York Department of Financial Services) is carried on in the captive model, and that the two insurance approaches are “vastly different."

“The capital reserve requirements required by a regulated jurisdiction like Bermuda bring regulatory oversight to the captive,” he said.

By contrast, “with self-insurance, an exchange can set aside $100 million and if things get tight, they can go ahead and repurpose that $100 million without notifying anybody and saying, ‘Hey, we need to go invest this elsewhere.’”

"The capital reserve requirements required by a regulated jurisdiction like Bermuda bring regulatory oversight to the captive."

This appears to indicate regulation requires them to have sufficient funds in reserve to cover their insurance policy.

[fillippone]

They didn't mention if security audits will become a standardized practice to qualify for crypto insurance. It could elevate overall security standards and prevent disasters like Quadriga whose CEO passed away unexpectedly while being the only one able to access their funds private keys. It could also cut down on scams and inside jobs as insurers would be incentivized to investigate the disappearance and theft of capital before covering losses.

They opened a market also for insurance.
Of course first insurance contracts were basically "bets" on future negative events happening. As the demand for this insurance will rise, insurers will both start being more "competent" to analyse operations on exchanges thus requiring said level of operational security to be able to provide insurances (I am thinking about independent audits, ISO certifications etc). The relevant thing is that the cost for this insurances will be rapidly decreasing and the ultimate benefiter of all this will be the clients of exchganges.

It appears other exchanges already carry insurance protection. Nice to know. It legitimizes the industry and will help alleviate concerns over the new and emerging technology. Banks in the USA having FDIC insurance and banks abroad having similar protection schemes in place may be somewhat inadequate and obsolete. But they do inspire confidence, which is important, I guess.

As far as I know almost every exchange has some sort of insurance, but it is the case only for hot wallets (or online wallets). Insurance of cold wallet is something relatively new.
Again, this is something the private customer might not really be interested in (I mean someone is keeping her funds on the exchange only for the trading necessity).
This is instead needed for institutional clients, where there might be some internal rules to prevent them to deposit anything on an uninsured  venue (this is standard practice for traditional financial products, so I think it will be the case for crypto financial products as well).

[alyssa85]

Regarding price setting, it turns out that the Chicago Board of Exchange is using the price on the Gemini exchange for their futures contracts:

https://fortune.com/2017/12/12/winklevoss-twins-bitcoin-futures/

The Winklevoss twins are co-founders of the Gemini exchange, which Cboe Global Markets Inc. is using as the basis for the daily settlement for the bitcoin futures that began trading this week.

If a whole eco-system is built up which uses Gemini for price-setting, they'll eventually get their ETF approved, also using Gemini for the price.

[fillippone]

Regarding price setting, it turns out that the Chicago Board of Exchange is using the price on the Gemini exchange for their futures contracts:

https://fortune.com/2017/12/12/winklevoss-twins-bitcoin-futures/

The Winklevoss twins are co-founders of the Gemini exchange, which Cboe Global Markets Inc. is using as the basis for the daily settlement for the bitcoin futures that began trading this week.

If a whole eco-system is built up which uses Gemini for price-setting, they'll eventually get their ETF approved, also using Gemini for the price.

Actually CME is using CME CF Bitcoin Reference Rate for daily settlement and CME CF Bitcoin Real-Time Index for marking to market during the day (basically the same methodology, par some details).

CME CF Bitcoin Reference Rate & CME CF Bitcoin Real-Time Index
CME CF Bitcoin Reference Rate (BRR) and CME CF Bitcoin Real-Time Index (BRTI), a standardized reference rate and spot price index with independent oversight are accelerating the professionalization of bitcoin trading. CME CF Crypto Currencies Indices have been generating BRR and BRTI rates since November 2016 with several bitcoin exchanges and trading platforms providing pricing data, including Bitstamp, Coinbase, Gemini, itBit, and Kraken.

So Gemini is only one of the 5 venue used to compute an average whose value is used to settle the future.

[yoseph]

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.

With this insurance company backing the exchange, people are going to flood to that particular exchange for their business without any fear about them losing their cryptos because they know they will be fairly compensated whenever the exchange is hacked and with this insurance it shows the security behind the exchange.

[alyssa85]

Actually CME is using CME CF Bitcoin Reference Rate for daily settlement and CME CF Bitcoin Real-Time Index for marking to market during the day (basically the same methodology, par some details).

CME CF Bitcoin Reference Rate & CME CF Bitcoin Real-Time Index
CME CF Bitcoin Reference Rate (BRR) and CME CF Bitcoin Real-Time Index (BRTI), a standardized reference rate and spot price index with independent oversight are accelerating the professionalization of bitcoin trading. CME CF Crypto Currencies Indices have been generating BRR and BRTI rates since November 2016 with several bitcoin exchanges and trading platforms providing pricing data, including Bitstamp, Coinbase, Gemini, itBit, and Kraken.

So Gemini is only one of the 5 venue used to compute an average whose value is used to settle the future.

Chicago Board of Exchange (CBoE) is a different futures provider than the Chicago Mercantile Exchange (CME)

[fillippone]

Actually CME is using CME CF Bitcoin Reference Rate for daily settlement and CME CF Bitcoin Real-Time Index for marking to market during the day (basically the same methodology, par some details).

CME CF Bitcoin Reference Rate & CME CF Bitcoin Real-Time Index
CME CF Bitcoin Reference Rate (BRR) and CME CF Bitcoin Real-Time Index (BRTI), a standardized reference rate and spot price index with independent oversight are accelerating the professionalization of bitcoin trading. CME CF Crypto Currencies Indices have been generating BRR and BRTI rates since November 2016 with several bitcoin exchanges and trading platforms providing pricing data, including Bitstamp, Coinbase, Gemini, itBit, and Kraken.

So Gemini is only one of the 5 venue used to compute an average whose value is used to settle the future.

Chicago Board of Exchange (CBoE) is a different futures provider than the Chicago Mercantile Exchange (CME)

Sorry, I totally misread your statement.
Yes, CBoE used to trade bitcoin futures until March 2019, when they shut down because they attracted tiny volumes compared to CME’s future.

Actually on the CBoE website I now see a BTCH0 future, and I am quite puzzled.

News about closure at CBoT
https://www.cnbc.com/2019/03/18/cboe-to-stop-listing-bitcoin-futures-as-interest-in-crypto-trading-cools.html

EDIT: the only explaination I have for this is that they decided to stop listing new series of bitcoin futures right after they started quoting the XBTHO (H0 means expiring March 20) that at the time was maturing in one year. Open Interest is neglibile. This is why I didn't think about CBoE, but yes alyssa85, you are technically right.

[chip1994]

This really has a positive effect on the professional traders. Because we have a large amount of capital, we can't put it in the same exchange because it has lots of risks. These days, when I hear that exchange exchanges are constantly hacked, I have to look for secure and protected exchanges. I appreciate Gemini now but being safe is not enough. Gemini exchanges need to list high and good marketcap coins so traders there have more choices.