Gemini Exchange Launches The ‘World’s First Regulated Stablecoin’
On Monday, September 10, popular cryptocurrency exchange Gemini announced the launch of a USD-pegged stablecoin called Gemini Dollar. In the official announcement, Gemini calls this as the “world’s first regulated stablecoin” since it has been approved by the New York Department of Financial Services (NYDFS).
The NYDFS regulatory body is also the creator of “BitLicense” framework for cryptocurrency firms, and also the strictest. NYDFS said that the agency had approved Gemini’s application as the exchange has assured that its stablecoin will be subjected to “effective risk-based controls and appropriate BSA/AML and OFAC controls to prevent the Gemini Dollar from being used in connection with money laundering or terrorist financing.”
Maria T. Vullo, superintendent of the NYDFS, pointed that a “strong regulatory framework” doesn’t inhibit innovation. Vullo said: “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.”
The Gemini Dollar is built on the Ethereum Blockchain Network using the ERC-20 standards. Each stablecoin is pegged to the U.S. Dollar in 1:1 ratio. In the official blog post, Gemini co-founder Cameron Winklevoss wrote in the blog post: “To date, there has been no trusted and regulated digital representation of the U.S. dollar that moves in an open, decentralized manner like cryptocurrencies. 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 official whitepaper of Gemini Dollar shows that the stablecoin will deliver a “solution that provides the security of an offline approval mechanism yet the flexibility of an online approval mechanism”.
The Gemini Trust Company will hold all the USD deposits against its number of tokens in circulation. Additionally, to protect its holdings, it will keep all the fiat currency holding in the U.S.-based State Street Bank. The Federal Deposit Insurance Corporation (FDIC) will provide insurance for these holdings via a "pass-through" deposit insurance program.
Moreover, the company’s holdings will get audited on a monthly basis by independent auditor BPM Accounting and Consulting. Gemini has also said that it will make these audits publicly available.
Stablecoin projects have received a lot of attention in the crypto industry in the past. This is because they help to easily source liquidity in the market without letting investors go through the hassle of crypt-to-fiat conversions every time.