Earlier this week, the Winklevoss twins announced a new currency built on the Ethereum blockchain that can be used for low cost cross-border transactions, all backed by the U.S. dollar. To date the Winklevoss twins have made the news for their efforts to bring cryptocurrencies into the mainstream. The twins, who founded Gemini, one of the United States’ largest cryptocurrency exchanges, have dubbed the new currency Gemini dollars, known by the symbol “GUSD.” Gemini has said each GUSD will be FDIC insured, federally audited, and entirely backed on a 1:1 basis by U.S. dollars. In other words, it’s a “stablecoin.”
The new currency will be competing with the most well-known stablecoin to date, Tether, known by the symbol “USDT.” Stablecoins like Tether function nearly the same as other cryptocurrencies but aren’t subject to the price volatility that cryptocurrencies are known for. Tether has garnered serious traction in the past 12 months, amassing billions of dollars in market cap. However because of rumored “wash trading” and a lack of regulatory oversight, the company has met with a lot of scrutiny and institutional money may have a hard time easing into it. Gemini hopes that its more closely regulated GUSD currency will give institutional money confidence to enter the crypto market.
Cryptocurrency has for quite some time stood for the idea of radicalization, elimination of middlemen, and individuality in the financial sphere, however Gemini’s GUSD doesn’t quite live up to that reputation — something crypto enthusiasts may not like but that institutional investors will.
With Gemini’s new dollar, institutional investors can assume much closer to zero risk than they would while dealing with other crypto such as Bitcoin. With each GUSD being pegged to a real dollar, it assumes the same value in the real world. Additionally, being FDIC insured, it would be the first time any type of currency is insured, protected, and also virtually immutable on a blockchain.
Before you start thinking this post is just a blatant plug for Gemini dollars, keep in mind that the inherent nature of GUSD means it’s not possible for me (or anyone) to influence its price. GUSD’s value won’t move regardless of what I say; it’s staying right where it is. And unlike any other stablecoin, it’s insured on a federal level. There is no amount of shilling for GUSD you could do to artificially inflate its price.
So what’s the importance of the fact that GUSD’s value won’t move? Well, it brings us back to the roots of cryptocurrency, and that is its technological and processing capability. GUSD won’t fall prey to currency speculation. It will be used for cross-border transactions that can settle nearly instantly.
Gemini’s issuance of GUSD is one of the most exciting pieces of news in the blockchain and cryptocurrency sphere in a very long time. Cryptocurrency can function through institutions as a payment mechanism as well as on a global level with GUSD. No more “Bitcoin to $1,000,000 this month!” speculation can thrive in a digital economy where there is now an asset that functions to ensure legitimacy.
This doesn’t in any way eliminate the need for other cryptocurrencies. In fact, it can only strengthen their value. Gemini dollars won’t make you a millionaire; their value won’t triple overnight like some cryptocurrencies in the past have, and they definitely won’t reach the moon, but they can create a sturdy foundation for the underlying cryptocurrency market.
With the introduction of a cryptocurrency that is fully compliant with laws, federally insured, backed by a real currency and immutable, with the capability to conduct cross-border transactions, we’re now seeing the very tip of the iceberg in terms of what cryptocurrencies can accomplish in a global economy.
Dima Zaitsev is international is chief of business analytics and PR lead at ICOBox. Dima has a PhD in Economics.
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