Winklevoss twins receive New York approval to launch new crypto coin
September 10 2018 - 11:06AM
ADVFN Crypto NewsWire
Cameron (left) and Tyler Winklevoss, CEO and CFO, respectively, of
Gemini Trust Company.
Two financial technology companies won New York state approval
to issue cryptocurrencies pegged to the U.S. dollar, creating more
regulated and transparent competitors to Tether and other so-called
stable coins.
Gemini Trust, the digital-asset exchange founded by Cameron and
Tyler Winklevoss, received approval from the New York Department of
Financial Services to launch the Gemini dollar, according to a
statement Monday. Paxos Trust, a blockchain company that caters to
financial institutions, got permission from the same regulator to
issue the Paxos Standard.
The two new coins will compete with Tether, Dai and other stable
coins designed to track the value of the traditional currency
they're linked to. Tether has grown to become one of the biggest
cryptocurrencies, but is shrouded in concern it's not actually
backed by dollars as its creators claim. Much of that concern stems
from Tether's refusal to be audited and because it won't disclose
its banks. The company denies any wrongdoing.
Available today, the Gemini dollar will offer more transparency
to potential users than other stable coins, Tyler Winklevoss said
in an interview. State Street Corp. will hold the U.S. dollars
backing the coin, said Kerri Doherty, a spokeswoman for the bank.
State Street won't act as a custodian for any digital assets. The
currency and its dollar reserves will also be audited every month
by San Francisco-based firm BPM to ensure they match, Winklevoss
said.
"We don't think anyone's solving for the trust problem,"
Winklevoss said in the phone interview. Audits have "been lacking
in the market up to this point," he said.
Institutional customers have expressed worries about the
trustworthiness and lack of regulation of the stable coins
available to them, he said. "Existing stable coins were not meeting
their needs, and we could create a stable coin that did," he
said.
Associating with State Street, a bank with roots stretching back
to the 18th century, may help address those institutions' qualms.
Gemini has also linked up with Trail of Bits, which did a security
review of the stable coin's affiliated smart contracts on the
ethereum network, according to the digital security company's chief
executive officer, Dan Guido.
Paxos Chief Executive Officer Chad Cascarilla said that the U.S.
dollars backing Paxos Standard will be held in several Federal
Deposit Insurance Corp.-insured banks based in the U.S., and their
stable coin will be reviewed by a "large auditing firm." He
declined to provide names of the auditor or the banks.
"The biggest thing this is doing is solving the plumbing issues
in the crypto space," Cascarilla said of the Paxos Standard. "Our
business is trust. We're not just doing this off some very light
forms of regulation."
Stable coins like Tether are meant to serve as digital
replacements for conventional currencies. They are often used to
pay out users on exchanges that lack banking access and therefore
access to fiat currencies.
Questions about Tether and Bitfinex, one of the world's largest
crypto-exchanges that also shares the same management team, have
dogged the virtual currency world since last year, when Bitfinex
lost banking relationships yet continued to operate. To date, $2.8
billion Tethers have been issued, according to the company's
website. The U.S. Commodity Futures Trading Commission subpoenaed
both firms in December, seeking proof that Tether is backed by a
reserve of U.S. dollars, as it claims. British Virgin Islands-based
Bitfinex and Tether haven't been accused of wrongdoing.
Gemini is registered with the state of New York as a trust
company, meaning it must put the needs of its customers before the
needs of the firm, what's known as fiduciary duty, Winklevoss said.
That's a higher standard than applied to companies that have
received BitLicense, the state's cryptocurrency permit created by
the New York Department of Financial Services, he said.
Paxos is also a regulated trust company.
"The DFS makes sure we're doing what we say we're doing,"
Winklevoss said. "That's usually how the trust problem is
solved."
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