In a blog post on September 10, the Winklevoss brothers made the announcement that Gemini, a cryptocurrency exchange that provides its customers with the service of selling, buying and storing digital currencies, will be issuing the Gemini dollar, a regulated stablecoin that will be backed by the U.S. dollar.
The Gemini dollar (GUSD) is aimed to act as the digital representation of the U.S. dollar. It employs the blockchain technology at its core and is regulated by the U.S. regulatory body, the New York State Department of Financial Services (NYDFS). As per the blog post, the Gemini dollar is a stablecoin that is:
- Issued by Gemini, a New York trust company.
- Strictly pegged 1:1 to the U.S. dollar.
- Built on the Ethereum network according to the ERC20 standard for tokens.
What makes Gemini dollar interesting is the prospect that it combines the creditworthiness and price stability of the U.S. dollar with blockchain. Also, regulation by NYDFS is the feature that makes it stand out in the eyes of the financial industry.
The 1:1 peg ratio bridges the gap that the company aims at filling between cryptos and fiat. U.S. dollars can be converted into Gemini dollars by the users through their Gemini account. The Gemini dollars are then transferred by the issuer to the Ethereum address that is specified by the user. Similarly, the digital dollars can be converted back into U.S. dollars by depositing them into the corresponding Gemini account.
Regarding the 1:1 peg between the U.S. dollar and the Gemini dollar, it is stated in the blog post that:
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.
As the entire system runs on the Ethereum network, smart contracts are used in the workflow presented forward by Gemini which makes the Gemini dollar even more appealing regarding its digital prospect. It is stated in the official blog post that “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 here.”
The Gemini dollar solves one of the major problems that is associated with the world of cryptocurrency, volatility. It is one of the reasons why cryptocurrencies are not getting incorporated into our financial structure. Investors refrain from entering this market owing to the risks that are presented forward. The need of the hour is to have a digital asset that utilizes the technological advancements presented forward by cryptocurrencies, and at the same time utilizes the stability offered by fiat currencies. Gemini Dollar might just prove to be the thing that the financial industry needs right now. Having a 1:1 peg with the U.S. dollar makes it attractive for both investors and the general public. Also, the Gemini dollar might just help better the overall perception that the cryptocurrency world has as of now in the financial industry.