New York-based cryptocurrency exchange Gemini today announced the launch of its new captive insurance company, Nakamoto, Ltd.
Captive insurance is a type of “self-insurance”—Nakamoto is wholly owned by Gemini. The idea is to provide insurance for Gemini Custody client funds to the tune of $200 million in total coverage, which is more than any other crypto custodian currently provides, according to the firm.
Cameron Winklevoss, president of Gemini, believes the lack of insurance options is one of the primary reasons why crypto has not crossed into the mainstream. “Gemini has created a captive insurance company to address this,” he explained in a statement. “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.”
Insurance companies generally aren’t too keen on crypto, given the industry’s reputation for volatility, hacks, thefts, and other cyberattacks. Major crypto exchanges have therefore sought to provide their customers with in-house insurance options.
Coinbase, for example, the leading cryptocurrency exchange in the US, announced a $255 million insurance plan last April for all customer funds held in online “hot” wallets. (Gemini Custody provides “cold,” or offline, storage.) Coinbase was also reportedly in talks with insurance broker Aon last July to launch its own regulated insurance company.
Perhaps not coincidentally, Aon was selected by Gemini to be Nakamoto’s captive manager.
"Currently, the crypto industry lacks insurance coverage similar to that available in traditional financial markets," Yusuf Hussain,head of risk of Gemini, said in statement. "Gemini recognized this gap and collaborated with two of the world's largest insurance brokers, Aon and Marsh, to solve for this."