Gemini, the bitcoin exchange founded by the Winklevoss twins, is gatecrashing a red-hot corner of the cryptocurrency market with a new stable coin, the company announced Monday.
The so-called Gemini dollar would be pegged to the US dollar, with each token backed by a US dollar in a reserve of cash held by State Street, the Wall Street custody bank. The firm is hoping the new coin, which is based on Ethereum’s network, will serve as a new type of digital cash that can be used at stores by customers.
The project, which is over a year in the making, addresses “a trust problem” common among other stable-coins, according to its white paper.
Gemini says oversight from financial regulators, specifically the New York Department of Financial Services, will lend its crypto more credibility than its competitors. The crypto is also subject to New York Banking Law, according to the exchange operator.
Already, it was assessed by information security company Trail of Bits over the course of eight weeks. Gemini, according to documents reviewed by Business Insider, fixed all the issues discovered by the audit. The Gemini dollar would go head-to-head with Tether, the controversial firm behind their USDT stable-coin that has dominated the market for stable coins. Skeptics have questioned whether Tether actually has the dollars it says to back its crypto.
And some market participants have linked the crypto to market manipulation. For instance, academics at the University of Texas published a paper alleging that Tether was used last year to manipulate the price of bitcoin, propping up its run to $20,000 in December.
Still, since the beginning of 2018 trades between USDT and bitcoin have become more common, Morgan Stanley found. The bank, which compiled data from over 350 exchanges, estimates 14.2% of bitcoin trades are paired against USDT, up from less than 1% in October.
Across the crypto space, projects are attempting to step on Tether’s turf, including TrueUSD and MakerDAO.
The Gemini dollar will launch next week and will ultimately trade on numerous exchanges, according to a spokeswoman.
Business Insider spoke with Gemini cofounder and co-CEO Tyler Winklevoss about the project and related topics in the cryptocurrency space.