Major US Crypto Exchange Obtains Insurance, Will it Have Positive Effect on the Industry?

This week, major US-based crypto exchange Gemini obtained insurance coverage from a consortium of leading insurance providers led by Aon, a multi-billion dollar insurance giant based in London.

Since its launch in 2014, Gemini insured its funds through the Federal Deposit Insurance Corporation, a US government agency that provides insurance to depositors in US commercial banks and savings institutions.

The insurance coverage secured by Gemini from Aon adds another layer of security to protect user funds, to ensure that in an unexpected case of a security breach, all users on the platform are properly compensated and reimbursed.

Previously, Zaif, one of the largest crypto exchanges in Japan, was forced to sell the majority of the company's stake to a corporation listed on the Tokyo Stock Exchange after it struggled to compensate users that were affected in a $60 million security breach.

If the exchange had implemented strong security measures and secured insurance coverage from a trusted insurance provider, then the firm could have compensated its users and maintained control over the company's equity.

As a result of the hack, the Japanese Financial Services Agency is expected to implement stricter policies on exchange security and insurance, subsequent to the conclusion of its official investigation into the Zaif security breach.

Already, in South Korea, the nation's blockchain association has encouraged all of the local exchanges including major trading platforms in the likes of Upbit, Bithumb, Korbit, and Gopax to obtain insurance coverage as a base requirement to run an exchange in the local cryptocurrency exchange market.

Upbit, the biggest cryptocurrency exchange in South Korea by daily trading volume, has already obtained insurance from Samsung, the country's leading insurance provider alongside Kyobo.

Bithumb and Korbit are expected to secure insurance coverage in the months to come as well.

Given the two security breaches of Bithumb and the fact that any exchange, small to large, can fall victim to a hacking attempt, the South Korea Blockchain Association stated that implementing a solid system to deal with security breaches is as important as preventing hacking attacks.