What if it were possible to bring some of the stability of a centrally-backed currency into the volatile, unpredictable world of cryptocurrency? That’s exactly the idea behind a new operation from the Winklevoss twins’ Gemini Trust Company. Today, Tyler and Cameron Winklevoss revealed the Gemini dollar, a 1-to-1 crypto-to-U.S. dollar cryptocurrency people can spend and purchase on the blockchain. Gemini’s price fluctuates with the USD—unlike Bitcoin or Ether. Many refer to it as a “stablecoin”. But like cryptocurrency, Gemini dollars will sit on a blockchain, ready for “borderless, 24/7” transactions, according to Tyler Winklevoss.
— Gemini (@Gemini) September 10, 2018
New Exchange Brings U.S. Dollar to Blockchain
Decentralized, largely unregulated and trustless, cryptocurrencies are disruptive innovations in a financial sector dominated by massive, centralized institutions. Where crypto makes contact with those institutions, their contradictions are the most apparent. Cryptocurrencies are volatile financial assets. And that volatility has dissuaded many regulators and firms from approving crypto-backed funds and embracing digital currencies.
One major reason for that hesitancy is the fundamental differences between fiat currencies central banks control and decentralized cryptocurrencies no one and everyone controls. Those differences become most apparent when it’s time for the two systems to interact. Converting from Bitcoin to a fiat currency like the U.S. dollar, for example, is still a fraught and unstable transaction. As a result, the widest use for cryptocurrencies is as an investment product. Digital currencies, for now, work better as a store of value than they do as a payment method.
But the Winklevoss twins think the Gemini Trust Company has an answer to that crucial problem: a new coin they call the Gemini dollar. The Gemini dollar is a fixed-price cryptocurrency called a stablecoin. In this case, the value of the Gemini dollar will always be the value of the U.S. dollar. This may reduce the attractiveness of Gemini as a store of value. But it will make it way more appealing as a way to buy things.
In an announcement posted today on Medium, Cameron Winklevoss describes the Gemini dollar as bringing the same desirable technological capabilities of cryptocurrency to the U.S. dollar. In other words, the Gemini dollar is a “trusted and regulated digital representation of the U.S. dollar that moves in an open, decentralized manner like cryptocurrencies.”
Gemini Dollar Wins Approval As First-Ever Regulated Stablecoin
For the Winklevoss twins, the third time could be the charm. After the U.S. SEC’s second rejection of their proposal for a Bitcoin ETF, the New York Department of Financial Services gave their approval to the Gemini Trust Company to launch the Gemini dollar.
Starting at 10 a.m. today, anyone can convert their U.S. dollars into Gemini dollars. Funds will be on deposit with State Street, a U.S. bank. People can then trade their Gemini dollars on the Ethereum blockchain and cash out to their Gemini account.
Unlike the U.S. dollar, however, people can send Gemini dollars to anyone, anywhere in the world at any time. Like the U.S. dollar, however, the bills that back Gemini are eligible for FDIC deposit insurance. Furthermore, a monthly audit will confirm the 1:1 price fix between Gemini and U.S. dollars. The Gemini Trust Company is also reporting that all smart contracts underlying the Gemini tokens have received a formal verification and audit from an independent security firm.
Starting today, Gemini is building a crucial bridge between legacy financial institutions and the emerging cryptocurrency market. Stablecoins bring more stability for crypto users who want to send and receive payments using digital currencies.