Stable coins, when launched in 2014, were considered to be the bridge between the traditional financial world and modern blockchain. Being backed by a fiat currency, they were devoid of volatility and gained popularity in 2018 as the volatility in crypto markets became rampant.
As they became popular, the leader of their pack, Tether got blamed for manipulating the price of cryptocurrencies, as well as their backing by dollar, was questioned. Considering the blames and misuses and combining them the positives, Winklevoss twins have introduced their version of the stable coin, the one that would be audited in the US and licensed by NYDFS, unlike its peers. Let’s welcome Gemini Dollar.
Gemini Dollar- US dollar on Blockchain
With a vision to improve the linkage between the fiat and cryptocurrency worlds by giving fiat currency the same desirable technological qualities of cryptocurrencies, Gemini, the crypto business promoted by the Winklevoss Brothers, have launched a stable coin called a Gemini Dollar. What stands out for Gemini compared to other stable coins is it’s a stable value coin which is,
- Issued by Gemini, a New York trust company,
- Strictly pegged 1:1 to the U.S. dollar, and
- 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 company will allow users to convert U.S. dollars in their Gemini account into Gemini dollars and withdraw them to their Ethereum wallets starting September 10, 2018, at 10 am ET. A user will also be able to automatically convert Gemini dollars into U.S. dollars by depositing them into your Gemini account.
The notification also mentioned
“The U.S dollars that correspond to the Gemini dollars issued and in circulation will be held at a bank located in the United States and eligible for FDIC “pass-through” deposit insurance, subject to applicable limitations. In addition, the U.S dollar deposit balance will be examined monthly by an independent registered public accounting firm to verify the 1:1 peg. All Independent Accountants’ Reports will be publicly available and the smart contracts underlying the Gemini dollar token have been fully audited and formally verified by an independent security firm”
Gemini Dollar- the end of “Tether”ing problems
The Gemini Dollar has received some positive comments from the crypto fraternity.
Joseph Young, the leading crypto journalist from Asia, said the Gemini Dollar is more important than ETF in 2018 as Trusted custody will facilitate capital from institutions. (no urgent need for ETF).
I think Winklevoss stablecoin is more important to crypto than an ETF in 2018.
Trusted custody will facilitate capital from institutions. (no urgent need for ETF)
Current alternatives (USDT, TUSD) are unlicensed. Gemini dollar is audited in the US and licensed by NYDFS.
— Joseph Young (@iamjosephyoung) September 10, 2018
Erik Voorhees from Shapeshift mentioned that Gemini Dollar could be a winner move as it has integrated Global Finance with Crypto Finance.
People will poo poo this, but it’s a big deal and an important step. Global finance is becoming further integrated with crypto finance. All that crypto needs in order to win is for this to continue. https://t.co/WKVsHKEqpR
— Erik Voorhees (@ErikVoorhees) September 10, 2018
More importantly, people get a Stable Coin in a true sense something that the world considered Tether to be. Being on the top of charts for market cap amidst cryptos, Tether commanded the stale coin market. With the rise in cryptocurrencies, the number of tethers outstanding grew from about $10 million to about $2.8 billion between January 2017 and September 2018. In early 2018 Tether accounted for about 10% of the trading volume of bitcoin, but during the summer of 2018, it accounted for up to 80% of bitcoin volume. Considering the demand, more than $500 million Tethers were issued in August 2018.
But all broke hell for the popular stable coin when it was named in the research by John M. Griffin and Amin Shams which suggested that trading associated with increases in the amount of tether and associated trading at the Bitfinex exchange accounted for about half of the price increase in bitcoin in late 2017. Reporters from Bloomberg, checking out accusations that tether pricing was manipulated on the Kraken exchange, found evidence that these prices were also manipulated. Red flags included small orders moving the price as much as larger orders, and “oddly specific order sizes—many going out to five decimal points, with some repeating frequently.”
With Tether’s credibility under question, Author David Gerard was quoted by the Wall Street Journal saying that
tether “is sort of the central bank of crypto trading … (yet) they don’t conduct themselves like you’d expect a responsible, sensible financial institution to do.”
Gemini Dollar, just being licensed and audited, opens a whole new world for bridging the gap between fiats and cryptos. A stable coin that people can trust and park their dollars in digitized form. Being a trusted custody, they can open doors for Institutions to digitize and tokenize their monies and deploy in the crypto markets.
Will Gemini Dollar replace Tether completely? Will it be able to reach the heights Tether has reached? Do let us know your views on the same.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Nilesh Maurya has been associated for past 8 years as an Investment Banker with Omega Capital, a bespoke Investment Banking outfit having offices in Mumbai, New York, Singapore, and Dubai. He has been a regular contributor to business publications such as Business India and Market Express and has been a mentor to many start-up companies. Follow him on Twitter at @KoinKing1 or connect with me on linkedin.