When a Crypto Insurance Company Realized It Might Need Two Licences, Not One
Daniel thought the hard part was over.
After fourteen months of structuring, raising capital, and working with regulators, his company had finally secured what few crypto founders ever achieve, a Bermuda Class IIGB insurance licence.
He had built a regulated insurance carrier.
Not a startup.
Not an experiment.
An insurer.
Licensed by one of the most respected insurance regulators in the world.
His company could now underwrite risk for digital asset custodians, exchanges, and institutional crypto platforms.
It was everything he had worked toward.
Until the regulator asked one unexpected question.
Chapter 1: The Question That Stopped the Meeting
The meeting had been routine.
Daniel and his team were reviewing operational plans with regulatory advisors.
They discussed capital structure.
Custody providers.
Risk management.
Everything aligned with the Insurance Act 1978 and the Class IIGB licensing framework.
Then someone asked:
“Will the insurance company itself ever hold client digital assets?”
Daniel answered confidently.
“Yes, potentially as part of premium collection and claims settlement.”
There was a pause.
Then came the follow-up question.
“If that happens, the company may also be conducting digital asset business.”
That was the moment Daniel realized something critical.
His insurance licence might not be enough.
Chapter 2: Two Separate Regulatory Worlds
Most crypto founders assume there is only one regulator involved.
But Bermuda operates two distinct regulatory regimes:
The Insurance Act 1978
and
The Digital Asset Business Act 2018 (DABA)
Each governs different activities.
The Insurance Act regulates insurance carriers.
The Digital Asset Business Act regulates crypto activities.
The distinction is subtle.
But critical.
Because depending on how the insurance company operates, it may fall under both.
Chapter 3: What the Insurance Licence Covers
Daniel’s Class IIGB licence allowed his company to:
- Underwrite insurance policies
- Collect premiums
- Maintain capital reserves
- Pay claims
As long as the company operated strictly as an insurance carrier, only the insurance licence was required.
But the moment the company began directly handling digital assets beyond insurance functions, the situation changed.
Because handling digital assets can itself be a regulated activity.
Chapter 4: The Moment an Insurance Company Becomes a Digital Asset Business
The Digital Asset Business Act defines regulated digital asset business activities broadly.
These include:
- Operating custody services
- Holding digital assets for others
- Providing digital asset wallet services
- Issuing or transferring digital assets
If Daniel’s insurance company began directly custodying digital assets for clients, outside its insurance role, it could be classified as conducting digital asset business.
And that would trigger an entirely separate licensing requirement.
A Digital Asset Business licence.
This would place the company under dual regulation.
Insurance regulator.
And a digital asset regulator.
Even though both were administered by the same authority.
Chapter 5: The Strategic Solution Most Institutional Crypto Insurers Use
Daniel’s advisors explained something important.
Most crypto insurance carriers structure their operations carefully to avoid triggering the digital asset business licence requirement.
They do this by outsourcing digital asset custody to licensed custodians.
Instead of holding digital assets directly, the insurer uses regulated third-party custodians.
This structure achieves several objectives:
It satisfies regulatory requirements.
It reduces operational risk.
It avoids triggering additional licensing requirements.
The insurance company remains an insurer.
Not a digital asset service provider.
This distinction simplifies regulatory compliance significantly.
Chapter 6: When an Insurance Company Does Need Both Licences
There are specific scenarios where a crypto insurance company must obtain both licences.
This happens when the insurance company itself performs regulated digital asset functions.
Examples include:
Operating its own digital asset custody platform
Holding client digital assets directly outside insurance functions
Providing wallet services directly to clients
Operating exchange or digital asset transfer services
In these cases, the company is no longer just an insurer.
It becomes both:
An insurance carrier
and
A digital asset business
This triggers dual licensing requirements.
The Class IIGB insurance licence.
And the Digital Asset Business licence.
Chapter 7: Why Most Institutional Crypto Insurance Companies Avoid Dual Licensing
Dual licensing significantly increases regulatory complexity.
It introduces additional requirements:
- Separate capital requirements
- Separate compliance frameworks
- Additional regulatory reporting
- Cybersecurity regulatory oversight
- Operational supervision under two regimes
For most insurers, this complexity is unnecessary.
Because insurance carriers do not need to custody digital assets themselves.
They only need to insure them.
Outsourcing custody achieves the same operational objective without triggering additional licensing.
This is why most institutional crypto insurers adopt this structure.
Chapter 8: The Strategic Advantage of Proper Regulatory Structuring
Daniel restructured the company’s operational model.
Instead of directly custodying digital assets, the insurer would work exclusively with licensed digital asset custodians.
Premiums paid in Bitcoin or Ethereum would be received through regulated custody providers.
Reserves held in digital assets would be maintained with regulated custodians.
The insurance company itself would never directly custody assets.
This structure ensured the company remained within the scope of its Class IIGB insurance licence.
Avoiding unnecessary regulatory complexity.
Maintaining regulatory clarity.
Protecting operational scalability.
Chapter 9: Why This Matters for Crypto Insurance Founders
Many founders make critical mistakes.
They assume an insurance licence automatically covers all digital asset activities.
It doesn’t.
Insurance regulation covers insurance.
Digital asset regulation covers crypto activities.
The moment an insurer crosses into digital asset service provision, additional licensing requirements apply.
Understanding this distinction is essential.
Because proper structuring can prevent unnecessary regulatory burden.
Chapter 10: The Outcome
Daniel’s company launched successfully.
Fully licensed.
Fully compliant.
Fully regulated.
It operated as a regulated insurance carrier under the Bermuda Class IIGB licence.
Without needing a Digital Asset Business licence.
Because the company had structured its operations correctly from the beginning.
The licence had not just authorized the company.
It had defined its role.
Because in regulated markets, what a company does matters.
But how it does it matters even more.
Final Reflection: The Difference Between Operating and Structuring
Insurance companies insure digital assets.
Digital asset companies custody digital assets.
The distinction seems small.
But it defines regulatory obligations.
Companies that understand this distinction operate efficiently.
Companies that don’t face unnecessary regulatory friction.
Because regulation isn’t just about obtaining licences.
It’s about structuring operations correctly.
And the companies that get this right are the ones that scale.
About CRYPTOVERSE Legal Consultancy
CRYPTOVERSE advises digital asset companies, insurance sponsors, and institutional investors on obtaining Bermuda Class IIGB insurance licences and structuring crypto insurance carriers in full compliance with Bermuda’s regulatory framework.
FAQs
1. Does a Bermuda crypto insurance licence allow digital asset custody?
No. A Bermuda Class IIGB insurance licence only covers insurance activities like underwriting, premiums, reserves, and claims. Direct digital asset custody may require a Digital Asset Business (DABA) licence.
2. When does a Bermuda crypto insurer need a DABA licence?
A DABA licence is required when a crypto insurance company directly provides digital asset services such as custody, wallet services, asset transfers, or exchange-related activities.
3. Can crypto insurers in Bermuda avoid a DABA licence?
Yes. Many Bermuda crypto insurers avoid dual licensing by using licensed third-party custodians instead of holding digital assets directly.
4. What is the difference between a Bermuda insurance licence and a DABA licence?
The Insurance Act 1978 regulates insurance activities, while the Digital Asset Business Act (DABA) 2018 regulates digital asset services like custody, wallets, and exchanges.
5. Why do crypto insurance companies use licensed custodians in Bermuda?
Licensed custodians help crypto insurers reduce regulatory burden, avoid DABA licensing, and keep insurance and digital asset activities clearly separated.