Decrypt’s Art, Fashion, and Entertainment Hub.
Bitcoin’s epic rise and fall in 2018 showed just how volatile cryptocurrencies can be. It triggered a flurry of news articles that questioned if Bitcoin could survive such a crash. And if so, would anyone invest in it again?
The biggest players in this space know that the way to restore legitimacy, and gain more widespread adoption, is attracting more traditional institutions.
But these institutions have two main concerns: regulation and management. They want investments are federally compliant, and handled transparently.
That’s where Gemini comes in. It’s a US dollar-backed cryptocurrency that is overseen by the New York State Department of Financial Services, adding legitimacy and making it attractive to traditional financial institutions.
What is Gemini?
Gemini is an exchange where customers can trade US dollars for cryptocurrencies – including bitcoin, Litecoin, Ether, and Zcash. It is also a licensed custodian, meaning it can store digital assets on behalf of customers.
Who created it?
Gemini is the brainchild of the Winklevoss twins – yes, the ones who famously got $65 million out of Mark Zuckerberg for stealing the idea for Facebook.
The billionaire twins invested some of that payout into bitcoin, got even more rich, and created their own exchange. They noticed in 2014 that US institutions wanted to invest in bitcoin, but were blocked because of US law. So they worked to get the blessing of regulatory departments and became a New York trust company – a business bound by New York Banking Law.
They said their ability to embrace cryptocurrency with regulatory financial compliance was a “bridge between the old world of money and the new world of money.”
A brief history
- 2014 – Gemini platform announced
- January 2015 – Launched in the United States
- October 2015 – Was issued a trust charter from the New York State Department of Financial Services
- October 2016 – Expanded into Asia
- September 2018 – Gemini dollar (GUSD) launched
What’s so special about it?
🏢 Traditional institutions – While Gemini is often compared to competing exchanges like Coinbase and Kraken, it has found a niche in large financial institutions and high-volume traders. This is because of its relatively low fees, and that trading biggers sums means even lower fees.
⚖️ Compliance and regulation – It’s also appealing because of the compliance and regulation built right in. Customer fiat funds are held at a bank and insured through the US government, and Gemini is legally bound as a trust and fiduciary. That means it has to meet compliance, anti-money laundering, and cybersecurity regulations as dictated by the state of New York.
💵 Licensed custodian – Gemini continues to attract institutions because it is a licensed custodian of digital assets. Many US institutions are legally required to keep digital assets with a licensed custodian, so Gemini is an obvious choice for secure cryptocurrency investment.
One downside is the relatively small list of supported countries. Gemini is currently only available in the US, Canada, Hong Kong, Singapore, South Korea, and the UK. It is also limited to trading in major cryptocurrencies (Bitcoin, Ethereum, Zcash, Litecoin, and Gemini dollar).
How does Gemini work?
Gemini is seen as a gateway to cryptocurrency trading. Using a bank transfer (US) or wire transfer (international), customers trade US dollars for cryptocurrency. This is different from some other platforms that require you to already have cryptocurrency to trade.
Customers can also exchange cryptocurrency back into US dollars.
What is Gemini dollar?
In autumn 2018, the Winklevoss twins announced Gemini’s own token: the Gemini dollar (GUSD). Its value is “pegged’ to the value of the US Dollar, so one Gemini dollar is equal to one US Dollar.
It’s a type of cryptocurrency known as a 'stablecoin'.. The idea of a stablecoin is that it’s less volatile than a currency like bitcoin because it is directly linked to a stable asset – in this case the US Dollar. Gemini says the Gemini dollar is the ‘world’s first regulated stablecoin’. Its unique formula takes the stability of the dollar, adds in blockchain technology, and includes U.S. regulation.
The regulation includes frequent auditing to make sure it actually holds that 1:1 value. That solves one of the major pitfalls of Tether, a competing currency that is also pegged to the dollar but lacks the transparency. The regular auditing helps with legitimacy and trust in Gemini.
The Gemini dollar also meets the ERC-20 standard, meaning it can be stored and exchanged for other tokens on the Ethereum network, or kept in a cryptocurrency wallet.
The Winklevoss twins show no signs of slowing down in their quest to bridge old money with new money. The recent inclusion of Litecoin on the exchange shows that Gemini wants to expand options for customers. Bitcoin Cash will likely be added in the near future too.
Gemini’s highly-regulated approach may draw criticism from crypto purists, but it remains highly attractive to customers who crave security and compliance.