Winklevoss’ Crypto Exchange Gemini Launches a Regulated, USD-Pegged Stablecoin

The cryptocurrency exchange Gemini, founded by twin brothers Cameron and Tyler Winklevoss, has launched a stable value coin or a stablecoin ‘Gemini dollar’, pegged 1:1 to the U.S. dollar (USD). It combines the creditworthiness and price stability of the USD with blockchain technology and the oversight of U.S. regulators, namely, the New York State Department of Financial Services (NYDFS). The exchange claims that the Gemini dollar is the world’s first regulated stablecoin. The smart contracts underlying the Gemini dollar token have also been fully audited and formally verified by an independent security firm.

The stablecoin with ticker symbol ‘GUSD’ is built on the Ethereum network according to the ERC20 standard for tokens. The users will be able to convert U.S. dollars in their Gemini account into Gemini dollars and withdraw them to an Ethereum address they specify. They will also be able to automatically convert Gemini dollars into U.S. dollars by depositing them into their Gemini account, the exchange said. The U.S dollars that correspond to the Gemini dollars issued and in circulation will be held at a bank located in the United States and be eligible for Federal Deposit Insurance Corporation (FDIC) “pass-through” deposit insurance, subject to applicable limitations.

The Gemini dollar aims to provide a crucial link between the traditional banking system and the new crypto economy. Cameron Winklevoss, Co-Founder & President of Gemini said that, to date, there has been no trusted and regulated digital representation of the U.S. dollar that moves in an open, decentralized manner like cryptocurrencies. He added that while cryptocurrencies operate 24/7/365 (similar to email), fiat currencies only operate during specific “business hours” (like snail mail) — a fundamental mismatch. As the next step in their mission to ‘build a bridge to the future of money’, Gemini aims to improve the linkage between these worlds by giving fiat currency the same desirable technological qualities of cryptocurrencies.

Gemini joins a growing list of stablecoins pegged to fiat currencies. The blockchain startup Paxos has also launched a stablecoin ‘Paxos Standard’ with ticker symbol PAX, with regulatory backing from the NYDFS. The PAX is fully backed by the U.S. dollar. Paxos is already a qualified custodian, meaning it is legally regulated and approved by the U.S. Securities and Exchange Commission (SEC) to hold client funds.

Cryptocurrencies have recently surged in popularity and investor interest. While they bear a promise perhaps as profound as the Internet itself, they suffer from substantial price volatility, thereby hindering their use as a medium of exchange and unit of account. Hence, the rise of stablecoins, where an issuer distributes a cryptographic token to customers in exchange for a specified fiat currency, like the U.S. dollar, at a fixed 1:1 exchange rate.

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