The Winklevoss stablecoin is one small step toward crypto acceptance | Industry
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A stablecoin is a cryptocurrency pegged 1-to-1 with another “stable” currency. In most cases, these coins are pegged to the US dollar and, as such, allow for true transfers of actual fiat currencies between parties using the blockchain. If you’re nodding off right now thinking about this, I would posit that these moves, however minor right now, are an important step forward in cryptocurrency acceptance.
The latest stablecoin to hit the virtual streets is the Gemini Dollar. This coin comes on the heels of the much-ridiculed Tether, a stablecoin created in 2014 that has been the the brunt of much criticism including suggestions that the team has been artificially pumping the currency with wash trades.
The new currency by Winklevoss-run Gemini is pegged directly to the US dollar on the Ethereum blockchain. This means that for every Gemini Dollar there is one actual dollar in a bank account. The Gemini Trust Company holds the deposits and has been officially accepted by the New York Department of Financial Services, the regulatory body associated with banking and finance.
The GD, in other words, is the first stablecoin to gain a truly official imprimatur.
“As the financial technology marketplace continues to evolve, New York is committed to fostering innovation while ensuring responsible growth. These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework that safeguards regulated entities and protects consumers,” said Department of Financial Services Superintendent Maria T. Vullo.
From the release:
DFS issued a limited purpose trust company charter to Gemini in October 2015 to operate a virtual currency exchange through which it offers customers services for buying, selling, sending, receiving, and storing virtual currency. DFS issued a limited purpose trust company charter in May 2015 to itBit, now Paxos Trust Company, which operates the itBit exchange, to offer services for buying, selling, sending, receiving, and storing virtual currency.
The NYDFS requires that the Gemini dollars “are fully exchangeable for a U.S. dollar” and that Gemini will maintain records of their movement. The requirements also include controls including AML and OFAC controls to present money laundering or terrorist financing. An independent accountant will examine the fiat-holding bank account to ensure that all of the stable coins are accounted for. You can convert and withdraw Gemini Dollars directly onto the Ethereum blockchain.
What all this means is that there is now a stable, regulated coin that should offset some of the traditional volatility of crypto. It’s an interesting – if limited – move by a big player in the crypto space.