Cameron and Tyler Winklevoss, co-founders of the Gemini exchange, have announced the creation of the Gemini dollar, which they are calling "the world's first regulated stablecoin."
In a post on Medium, Cameron Winklevoss wrote:
"Enter the Gemini dollar – a stable value coin (often called a "stablecoin") that is (i) issued by Gemini, a New York trust company, (ii) strictly pegged 1:1 to the U.S. dollar, and (iii) built on the Ethereum network according to the ERC20 standard for tokens. The Gemini dollar (ticker symbol: GUSD) combines the creditworthiness and price stability of the U.S. dollar with blockchain technology and the oversight of U.S. regulators, namely, the New York State Department of Financial Services (NYDFS)."
The NYDFS also announced its approval of the Gemini dollar (and of a similar currency recently created by Paxos), stating, "As part of the approval of these new products, DFS has established required conditions to ensure that each trust company maintains robust policies and procedures to address risks and apply New York's strong standards and regulations regarding anti-money laundering, anti-fraud, and consumer protection measures."
In the Medium post, Cameron Winklevoss explained that cryptocurrency and fiat have a "fundamental mismatch," in that cryptocurrency transactions can occur any hour of the day while fiat transactions only happen during banking hours. His brother echoed this sentiment in an interview with CNBC.
"It is really a matter of bringing your US dollars on to the blockchain and making them borderless 24/7," he said.
According to the white paper, as an ERC20-compliant token, "the Gemini dollar can be transferred on the Ethereum network and stored in any Ethereum address."
The Gemini dollar is, of course, not the first stablecoin. Essentially, it is intended to offer the same benefits that Tether intended to offer: the speed and flexibility of cryptocurrency but without the volatility, so that users can more easily move money in and out of exchanges.
Tether, however, has been plagued with scandal. An attempt to audit the currency, and verify that the fiat it was supposedly backed by actually existed, was aborted. The currency was even deemed "unauditable" by one commentator. Tether later released a "transparency update," though the report was limited and the preceding investigation did not conform to accepted accounting or auditing practices.
In contrast, the Winklevosses have been cultivating a reputation for being aboveboard. In what has looked like an ongoing attempt to bring some respectability and predictability to the crypto space, the brothers have initiated the idea of the Virtual Commodity Association, hired legacy industry professionals, and (possibly most notably) never complained about the much-maligned BitLicense requirements.
According to the Gemini dollar white paper, the creation of a viable stablecoin is as much "a trust problem" as a technological one. To ensure this trust, Cameron Winklevoss claims the "U.S dollar deposit balance will be examined monthly by an independent registered public accounting firm to verify the 1:1 peg." Also, the US dollars that back the cryptocurrency will be held in a bank separate from Gemini Trust, namely State Street bank, headquartered in Boston.
With these assurances, and their seemingly enthusiastic desire to be regulated, the Winklevoss brothers hope they have solved the "trust problem."
But they also claim to have solved the problem of volatility, which has prevented cryptocurrencies from becoming a medium of exchange or unit of account. Those limitations have in turn prevented cryptocurrency from becoming widely adopted. The Winklevosses say their goal when they created the Gemini exchange was to "build a bridge to the future of money." The Gemini dollar appears to be a bridge between fiat and crypto, and they are touting it as the safest and most reliable of any such bridge so far created.