A cryptocurrency exchange is an online platform where you can exchange fiat for digital assets or one kind of digital assets for another based on the market value of the given assets. Think TD Ameritrade or Charles Schwab for stocks. In early 2019, U.S.-based crypto-exchange Gemini announced it had completed a SOC 2 Type 1 examination. The SOC 2 report focuses on a business’s non-financial reporting controls as they relate to security, availability, processing integrity, confidentiality and privacy of a system. Gemini claims to be the world’s first cryptocurrency exchange and custodian to demonstrate this level of security compliance in protecting customer data and funds. Coupled with digital asset insurance, Gemini has now taken multiple steps toward raising the bar for consumer protection, safeguards and industry best practices. The inspection, carried out by one of the Big Four accounting firms, guarantees that the exchange system meets the high standards of the American Institute of Certified Public Accountants (AICPA).
This Type 1 report is a step in the right direction which addresses the design of controls as of a point in time. Yusuf Hussain, Head of Risk for Gemini, has stated that in 2019, Gemini will further strengthen its control environment and have a Type 2 report performed which addresses the operating effectiveness of controls over a period of time. The Type 1 report effectively ensures that Gemini has an operating system in place, whereas the Type 2 report ensures that the operating system is working, and all safeguards and security are effectively working.
Learn how Gemini and its partner, Flexa, enable consumers to use Gemini dollars, bitcoin, ether and bitcoin cash at big name merchants such as GameStop, Nordstrom, Whole Foods, Caribou Coffee, Jamba Juice, and Crate and Barrel.
Overall, this move by Gemini not only makes risk management and market assurance a competitive advantage for their firm, but also aims to send a signal to other market participants that digital assets are reaching a point of operational and managerial maturity, enabling institutional capital to enter the market.