The Gemini dollar is, as their website boasts, the very first regulated stable coin – a cryptocurrency tethered to the US dollar under full recognition of US regulators. The Gemini dollar will effectively allow users to send and receive US dollars over the Ethereum blockchain.
And there are a lot of reasons why this is big news for the crypto-verse.
Why Are Stable Coins Good for the Crypto Economy?
On the practical level, this is the next big step in digital money.
As Cameron points out in his September 10 blog post, there is a functionality gap between fiat money and cryptocurrencies. Cryptocurrencies can be transferred near-instantaneously and around the clock, whereas centralized fiat currencies are constrained to business hours.
Stable coins such as the Gemini dollar seek to bridge that gap for people who are put off by the volatility of the crypto markets. At last, here is a digital currency that functions 24/7, but will not appreciate or depreciate wildly in value over a short period of time.
This could do wonders for mass adoption of crypto, as it neutralizes the risk of accepting a set amount of a cryptocurrency for the purchase of, say, a tablet and then having that crypto suddenly tank in value.
Similarly, a stable coin could encourage the use of cryptocurrency as a means of exchange rather than a long-term investment. After all, if you think another market boom is on its way, and your 10 tokens that you bought for $10 today could be worth $100 in a month’s time, where is your incentive to spend them now?
And, as the Gemini dollar is being overseen by the New York Department of Financial Services, those who are worried about compliance issues need worry no more. The Gemini dollar allows buyers and sellers to focus on what it was originally meant to function as: a means of exchange.
How Does Gemini Dollar Work?
US dollars can be converted into Gemini dollars through the Gemini exchange, and then transferred to an Ethereum account. Conversely, if users deposit their Gemini dollars into a Gemini account, they can be converted back to USD.
Cameron Winklevoss further explains:
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.
He states that the reports of independent accountants will be made available on the Gemini website, and all Gemini token smart contracts have been fully audited by an independent security firm.
Clearly, transparency and regulation compliance is of primary importance in this venture, which will surely go far in easing many misgivings that government and financial bodies have regarding cryptocurrency.
The Winklevosses have high hopes that the Gemini dollar will act as “a crucial link between the traditional banking system and the new, rapidly growing crypto economy.”
Surely, this is a major step in making cryptocurrency more palatable to merchants and buyers, making it easy to send money back and forth with the click of a button, and accepting US dollars in your decentralized applications.
Moreover, this will work towards stabilizing the crypto market as a whole. Being able to offer a stable coin strengthens Gemini in the competition against other exchange heavy-hitters, such as Binance.