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New York gives approval to two new U.S. dollar-linked stablecoins
The New York Department of Financial Services has approved two new stablecoins as the market to become the blockchain-based transfer token of choice heats up.
Leading the announcements was the Gemini Dollar from the Gemini Trust Co. LLC digital asset exchange founded by the Winklevoss twins.
The Gemini Dollar is a 1:1 U.S. dollar-linked stablecoin built on the Ethereum network according to the ERC20 standard for tokens. The GUSD is pitched as combining the creditworthiness and price stability of the U.S. dollar with blockchain technology and the oversight of U.S. regulators. It’s also claimed to be “the world’s first regulated stablecoin.”
The second stablecoin approval was given to the Paxos Trust Co. LLC for Paxos Standard which like GUSD is 1:1 linked to the U.S. dollar and operates on the Ethereum network.
In the context of both, operating on the Ethereum network does not mean operating in Ethereum but the blockchain in which the cryptocurrency also operates — a public, blockchain-based distributed computing platform and operating system featuring smart contract capabilities.
Stablecoins offer the benefits of a cryptocurrency, including digital exchange and smart contract support, without massive fluctuations in their price because the coin or token directly corresponds to a tangible asset. In the case of PAX and GUSD, it’s the U.S. dollar.
In a post on Medium, Cameron Winklevoss wrote that “to date, there has been no trusted and regulated digital representation of the U.S. dollar that moves in an open, decentralized manner like cryptocurrencies,” and the problem is real.
The current leader in the market, Bitfinex’s Tether USD stablecoin, is under investigation by U.S. Commodity Futures Trading Commission in relation to allegations that it never had U.S. dollars in reserve to back its value.
Gemini and Paxos are not alone in attempting to bring a trusted stablecoin to market. The Andreessen Horowitz’s a16z-backed TrustToken Inc. raised $61 million for its TrueUSD in July, while Singapore-based Terra raised $32 million from leading Asian cryptocurrency exchanges in August for its own stablecoin.
Where Winklevoss and Paxos stand out is their regulatory approval, though so far only in New York. Neither company mentions trying to obtain approval in other states, but NYDFS approval has been the first step on a path for a number of cryptocurrency exchanges and products previously, so it possibly could be the first step in that direction.
Image: Gemini
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