In a significant step towards attracting institutional investors, Gemini — The Winklevoss brothers’ cryptocurrency exchange and digital asset custodian — secured insurance coverage for custodial digital assets through a global consortium of insurers orchestrated by Aon.
Insurance of custodial assets is a significant assurance for institutional investors as it is ubiquitous in the traditional financial world and largely missing from the digital asset sector. Gemini has been targeting institutional investors, and the announcement follows the launch of their stablecoin — the Gemini Dollar — pegged to the US Dollar.
Custodial Insurance and Recent Developments
Gemini already offers FDIC-insured USD deposits on its exchange. The move to secure insurance coverage for custodial assets represents a targeted move towards institutional investors, however.
Convincing insurance underwriters to back digital assets is also significant as it may signal a broader industry trend towards insurance companies becoming more comfortable with the cryptocurrency sector. Aon — who arranged the insurance coverage — is a global professional service firm focusing on providing a wide range of risk solutions. It is worth watching whether similar companies follow suit with other U.S. exchanges.
Gemini has emerged as stiff competition to Coinbase, who has historically dominated the exchange market in the U.S. Both exchanges now seem to be actively pursuing institutional investor interest with Coinbase recently bringing Chris Dodds — a Charles Schwab board member — on as a Coinbase board member and Gemini announcing that Robert Cornish of the NYSE had joined the company.
Gemini is also partnered with the CBOE Futures Exchange, who launched the first Bitcoin futures contract last year. Further, their existence in the tightly regulated New York jurisdiction is likely viewed as another assurance to institutional investors that the exchange will eventually offer services in line with legacy finance institutions.
The news follows on the heels of the launch of the Gemini Dollar, a regulated stablecoin pegged to the USD. The launch of the Gemini Dollar coincided with several other stablecoin launches recently including Paxos Standard and USD Coin. However, the Gemini Dollar launch was highly controversial, resulting from revelations that the stablecoin can be frozen at any time by Gemini.
Such revelations are likely to continue as exchanges foster closer ties to institutions where they are subject to pressure to remain regulatory compliant. The supervision of the Gemini Dollar falls under the jurisdiction of the New York Department of Financial Services, creator of the highly polarizing BitLicense.