In this episode of "The Bitcoin Verdict," host and partner Hailey Lennon is joined by J. Gdanski, CEO and founder of cryptocurrency insurance company Evertas, to discuss how his company navigates an industry that doesn't fit into traditional insurance coverage and policies. Evertas is a client of Brown Rudnick.
One of the bigger challenges in providing insurance in the crypto space is complexities in calculating and covering risk, according to Gdanski.
"What is unique about what we're doing, which is different than what was done with cyber, is we actually have deep technical experts from the field and the industry that we're trying to insure, and we started with the kind of bottom-up risk management and risk assessment framework, and from there, it came to pricing its products," Gdanski said. "What was done with cyber was just this sort of top-down thing; it was designed by insurance people who were not experts in anything except for insurance."
Founded in 2017, Evertas is a crypto insurance company that develops regulated insurance and risk mitigation solutions for crypto assets. The Chicago-based company focuses on covering institutional holders of crypto assets including exchanges, custodians, traditional financial institutions, funds, family offices, and high-net-worth individuals.
Before starting Evertas, Gdanski was a leader in the enterprise blockchain space and was one of the first to work on institutional custody for crypto. He also served as an early contributor to blockchain consortia, including Enterprise Ethereum Alliance, of which he was a founding member.
As the need for crypto insurance develops, government agencies and regulators are starting to have an interest in people having coverage to protect themselves, Gdanski said.
"It used to be 'have insurance, just show them a piece of paper that says insurance with your company's name on it or not,'" he said. "That's changed, shockingly. Sooner than I thought, actually. So people with money transmitter licenses, they would have these Fidelity insurance policies, they were relatively inexpensive, and I thought it would be sometime this year or next, but they started last year."
He said companies that are dealing in cryptocurrency and fiat started getting questions last year from regulators and the government about why their policies only covered the fiat transfers, not crypto.
And now, those companies are being required to have crypto insurance, as well, which led to a number of panicked phone calls from people who couldn't operate their business until they got a new insurance policy, Gdanski said.
"I think certainly, when you look at Hong Kong, for years Hong Kong authorities had very stringent insurance requirements," he said. "There are likely to be some coming out of the EU, they're already in the UAE. And it's not just that you have a piece of paper that has your name on it that says insurance, but that the insurance is actually covering the right risk."
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