NEW YORK (Reuters) – New York state on Monday approved Gemini Trust Company’s and Paxos Trust Company’s dollar-linked digital currencies, the first stablecoins to get the nod from the region’s regulator.
FILE PHOTO: Entrepeneurs Tyler and Cameron Winklevoss arrive at the Metropolitan Museum of Art Costume Institute Gala (Met Gala) in New York on May 2, 2016. REUTERS/Lucas Jackson/File Photo
The Gemini dollar by Gemini, the digital asset exchange launched by twins Cameron and Tyler Winklevoss, is a stablecoin that will allow users to send and receive U.S. dollars on the Ethereum blockchain. It will be strictly pegged to the U.S. dollar on a one-to-one basis.
Paxos’ stablecoin, the Paxos Standard, will also be fully collateralized by the U.S. dollar on a one-to-one basis.
“These approvals demonstrate that companies can create change and strong standards of compliance within a strong state regulatory framework that safeguards regulated entities and protects consumers,” New York state Department of Fianancial Services Superintendent Maria Vullo said in a statement on Monday.
Both coins are available on their respective exchanges on Monday.
One of the drawbacks of cryptocurrencies – digital tokens that use encryption techniques to secure transactions – is price volatility, which hinders means of payments or medium of exchange.
The stablecoin – any digital currency pegged to a stable asset, such as gold or the dollar – serves as a hedge against the volatility.
“When we founded Gemini over four years ago, our mission was simple: build a bridge to the future of money,” the Winklevoss twins wrote in a blog on Monday. “As a first step, this meant making it safe and easy to buy, sell, and store cryptocurrencies.”
While cryptocurrencies operate 24 hours a day, fiat currencies only operate during specific business hours, they noted. So far, they said, there has been no trusted and regulated digital representation of the dollar that moves in an open, decentralized manner like cryptocurrencies.
“Being able to move payments 24 hours a day, seven days a week and make payments programmable in a dynamic way is still very difficult,” Paxos Chief Executive Chad Cascarilla said in an interview with Reuters.
Gemini said the U.S dollars that correspond to the Gemini dollars issued and in circulation will be held at a U.S. bank and eligible for the Federal Deposit Insurance Corporation’s “pass-through” deposit insurance.
This type of insurance covers the interests of owners or beneficiaries in a qualified fiduciary or custodial account.
In Paxos’ case, customers can purchase and redeem tokens directly through Paxos.com one to one with the dollar.
Investors who trade digital assets through the itBit exchange or its over the counter desk will also have the option to cash out their digital assets to Paxos Standard instantaneously, Cascarilla said.
Paxos Standard will also be available for listing on other exchanges and will trade under the ticker symbol PAX.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan Thomas