Move over Uncle Sam. The Winklevoss twins’ Gemini Trust Company is rolling out Gemini dollar, a regulated stablecoin that lets users send and receive U.S. dollars on the Ethereum network, the New York-based company announced on Monday. The rollout is hailed as a key step to increasing trust and economic activity in the volatile cryptocurrency industry.
The Gemini dollar (CRYPTO: GUSD) has received approval from New York Department of Financial Services and is the world’s first regulated stablecoin. Similar to Tether, it will maintain an equal value with U.S. dollar.
Cameron Winklevoss, co-founder and president of Gemini, wrote in a Sept. 10 blog: “When we founded Gemini over four years ago, our mission was simple: build a bridge to the future of money …. “We must improve the linkage between these worlds by giving fiat currency the same desirable technological qualities of cryptocurrencies.”
Investors buy digital coins like Bitcoin but these have qualities of a volatile asset. In contrast, Gemini dollars induce commercial buy-and-sell transactions by behaving like traditional money. A stablecoin lets people buy and sell goods at predictable, foreseeable prices because it’s pegged to the U.S. dollar. Gemini dollars will be deposited in a U.S. bank, State Street. Many observers believe that stablecoins will see wider adoption in the years ahead with an expansive list of use cases.
Building a viable stablecoin is as much of a trust problem as it is a computer science one. The Gemini dollar is the first stablecoin in the world that has solved for both. That’s the innovation here. From our white paper: pic.twitter.com/g4IEXl6Ldm
— Tyler Winklevoss (@tylerwinklevoss) September 10, 2018
According to Cameron Winklevoss, Gemini dollars have three key features. It’s issued by Gemini, a New York trust company and is strictly pegged 1:1 to the U.S. dollar. It’s “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.”
It can be tricky to use Bitcoins (CRYPTO: BTC) to pay for goods and services. Because of BTC’s volatility, a consumer-investor can significantly overpay or underpay for a product depending on the crypto’s steep price movement. A $1,000 laptop can cost $800 or $1,200 in a few hours or minutes. Moreover, it can be risky for merchants to accept payments in Bitcoin if its value suddenly plummets.
“Building a viable stablecoin is as much of a trust problem as it is a computer science one,” wrote twin brother Tyler Winklevoss on Twitter. “The Gemini dollar is the first stablecoin in the world that has solved for both. That’s the innovation here.”
As of Monday, users will be able to convert U.S. dollars into Gemini dollars through Gemini’s cryptocurrency exchange. These can be withdrawn to an Ethereum address. Users can also convert Gemini dollars into U.S. dollars by depositing them into a Gemini account.
According to Cameron, corresponding U.S. dollars will be held at a U.S. bank and eligible for FDIC “pass-through” deposit insurance. And USD deposit balance will be audited monthly by an accounting firm in order to verify the 1:1 ratio. “The smart contracts underlying the Gemini dollar token have been fully audited and formally verified by an independent security firm, whose report is publicly available,” added Cameron Winklevoss.
The future of money is certainly digital. And stablecoins represent an important step to making that happen on a daily basis.
Articles by Marvin Dumont:
Disclaimer: The views expressed in this article belong solely to the author. Information contained herein should not be construed as investment advice.