Gemini Launches NYDFS-Regulated Dollar-Pegged Crypto

The Winklevoss brothers, Tyler and Cameron, continue to remain in the limelight for their innovative ventures and offerings in the cryptocurrency world. The owners and founders of the Gemini cryptocurrency exchange have announced the launch of a dollar-backed stablecoin called Gemini dollar. (See also, Is Stablecoin the Answer to All Cryptocurrency Problems?)

Dollar-pegged Stablecoin Launched on Ethereum Blockchain

The digital tokens will be pegged in value to the U.S. dollar and will be transacted and operated on the Ethereum blockchain. Starting September 10, 2018, the Gemini exchange users will be able to convert their fiat U.S. dollars into Gemini dollars, and they will be able to withdraw them to their desired Ethereum addresses. The reverse conversion, from Gemini dollars to USD, can be done by depositing them into the user’s Gemini account. It will allow liquidity for participants desirous of sending or receiving U.S. dollars through the Ethereum network that complies with the ERC20 standard for tokens. (For more, see What is ERC-20 and What Does it Mean for Ethereum?)

Being strictly pegged to the American fiat currency (U.S. dollar), the operators will maintain the necessary reserves. The Gemini Trust Company will be responsible for holding the necessary USD deposits that will correspond to the number of Gemini dollar tokens in circulation. The cryptocurrency will be securely held by State Street Bank and will be insured through the Federal Deposit Insurance Corporation (FDIC)'s "pass-through" deposit insurance program within specified limits. The stablecoin has secured the necessary approval from the New York Department of Financial Services (NYDFS).

Calling the launch of the stablecoin as a natural extension of Gemini services, Cameron Winklevoss highlighted the key gap that exists between the traditional banking system that operates only during standard banking hours and the world of cryptocurrencies that operates 24/7 all year long. The introduction of Gemini dollar aims to “improve the linkage between these worlds by giving fiat currency the same desirable technological qualities of cryptocurrencies.”

Since stablecoins are pegged to real-world fiat currencies, their exchange value does not fluctuate with high volatility like that observed in valuations of other popular cryptocurrencies like bitcoin and ethereum. Transacting through such stablecoins allows stable exchange rates and benefits of instant payments, without any high transaction costs.

The launch of a pegged, stable cryptocoin adds another milestone for Gemini and its founders. Since December of last year, the Winklevoss twins have secured eight different crypto-related patents. (See also, Winklevoss Twins Secure Patent for Crypto Key Storage System.)

Investing in cryptocurrencies and Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns no cryptocurrencies.