Gemini Trust launches first cryptocurrency custody captive

Gemini Trust Company, a cryptocurrency exchange and custodian, has launched a captive insurance company, Nakamoto, in Bermuda.

Nakamoto is thought to be the first captive to insure crypto custody, allowing Gemini Custody to increase its insurance capacity beyond the coverage currently available in the commercial insurance market.

The captive currently only writes custody risk coverage, but it is already thinking about potentially expanding that to insure other risks for Gemini.

Cameron Winklevoss, president of Gemini, said insurance is one of the main barriers to crypto mass adoption. This captive was launched to address this problem, he explained.

Yusuf Hussain, head of risk at Gemini, added: “There is limited capacity at high premiums via the commercial markets. The captive will help fill this insurance gap for crypto exchanges and custodians. Additionally, the captive is a signal that the industry is maturing in the same way traditional finance has.”

Aon and Marsh worked with Gemini in developing the captive. Aon serves as Nakamoto's captive manager, giving it access to broader re/insurance markets. Marsh's digital asset risk transfer (DART) team brokered excess insurance from the commercial insurance markets to provide a custody insurance solution.

Hussain said: “There were many components to establishing the captive, however, given Bermuda's expertise and our relationship with Aon, we were appropriately managed through the process.”

Hussain said Gemini has had a regulation-first approach from the start, and its choice of domicile was consistent with that focus. “We evaluated multiple jurisdictions and moved forward with Bermuda as they are the leading captive domicile with a robust regulatory framework,” he said.

The island was also the obvious domicile to choose given its focus on growing and attracting fintech businesses, he added.

Gemini now has access to $200 million in insurance coverage, the largest limit of insurance coverage purchased by any crypto custodian in the world. Gemini customers can also now purchase additional insurance for their segregated crypto assets to provide even greater coverage.

“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,” Hussain said. The captive gives Gemini insurance coverage that is more in line with what is available in traditional financial markets, he added.

Nakamoto is licensed by the Bermuda Monetary Authority.