Today Yusuf Hussain, head of risk at Gemini announced the exchange had obtained insurance coverage for the funds held in clients' hot wallets.
In a post on Medium, Hussain wrote:
"[I]nsurers have been hesitant to insure the crypto industry due to a large number of high-profile hacks that have resulted in catastrophic losses over the years, and the poor security standards, internal controls, and policies and procedures that have unfortunately characterized much of our industry. As a result, many crypto exchanges and custodians have been either (i) unable to obtain insurance or (ii) shied away from it due to the high cost of premiums required by the few insurers willing to insure the industry."
While Gemini claims most customer assets are held in its offline "cold storage," some are held in the hot wallet hosted by Amazon Web Services. Online hot wallets are more vulnerable to theft and have been targets of some of the major exchange hacks. Cryptocurrency lost through such thefts may sometimes be unrecoverable, or at best, may only be recovered through a lengthy litigation process.
By obtaining insurance for these funds, Gemini, which has hired legacy financial executives and demonstrated an eagerness to be regulated, seems to be continuing to attempt to build a reputation as a trustworthy cryptocurrency exchange.
"Not only is this a tremendous win for Gemini customers but this is also a win for the broader crypto industry in furthering consumer protection," Hussain wrote.