Gemini Dollar (GUSD): A Transparent Stablecoin
The Gemini dollar, or GUSD, is the one of the first U.S. dollar-backed stablecoins to get approval from a U.S. regulatory body. It is an ERC-20 token built on Ethereum.
Updated May 25, 2021 • 2 min read
The Gemini dollar, or GUSD, is the one of the first U.S. dollar-backed stablecoins to get approval from a U.S. regulatory body. It is an ERC-20 token built on Ethereum. Tyler and Cameron Winklevoss led the creation of this stablecoin, which is issued by Gemini Trust Company LLC, which from inception has elected to fully comply with New York banking laws. If you’d like to learn more about GUSD, check out Gemini Dollar (GUSD): Use Cases and Unique Features.
GUSD as a Transparent Alternative to Earlier Fiat-Backed Stablecoins
In contrast to bitcoin and other traditional cryptocurrencies, which tend to display extreme price fluctuations, a stablecoin is a cryptocurrency built to maintain a steady value. Stablecoins achieve price stability in a variety of ways. Some rely on advanced computation, while others peg (or bind) their value to an underlying asset such as gold or fiat currency (e.g. the Euro or the U.S. dollar). The most commonly used stablecoins are those pegged one-to-one with the U.S. dollar (USD). These stablecoins maintain value by holding one USD in reserve for each stablecoin issued.
The Gemini dollar was designed to provide a transparent and regulatory compliant connection between traditional financial systems, which are based on fiat currencies, and the ever-growing blockchain industry. Released on September 10, 2018, GUSD is an ERC-20 token that can be stored in any digital wallet that accepts Ethereum tokens.
Superior Regulatory Requirements: How GUSD Is Regulated
Gemini secured a New York state charter in 2015, and was one of the first cryptocurrency exchanges to become fully regulated in the United States. It is subject to New York banking laws and the regulatory authority of the New York State Department of Financial Services. Gemini has proactively developed its relationship with legal and regulatory bodies in order to foster trust between the traditional financial system and blockchain community. Notably, Gemini was the first exchange to apply for and be designated as a New York Trust Company.
The Gemini Dollar is fully backed at a one-to-one ratio with the U.S. dollar. The number of Gemini dollar tokens in circulation is equal to the number of U.S. dollars held at a bank in the United States, and the system is insured with pass-through FDIC deposit insurance as a protective measure against money laundering, theft, and other illicit activities. Overall, Gemini Trust makes use of a centralized system that helps protect against security threats, giving the Gemini dollar key regulatory advantages over many of its competitors.
Gemini mints new GUSD tokens and adds a corresponding amount of USD to the backing bank account when a customer buys GUSD through the Gemini exchange. Conversely, when GUSD is sold on the exchange, it is automatically converted back into U.S. dollars.
GUSD and Transparency
GUSD is audited on a monthly basis by BPM, a private and independent accounting firm that ensures there is parity between the amount of USD in reserve and the amount of GUSD in circulation. To further maintain transparency, the GUSD ledger itself is stored on the Ethereum blockchain. By storing GUSD on the Ethereum network, both Gemini and its users benefit, and all parties can openly view the total number of GUSD in circulation at any time, encouraging a system of mutual trust.
The primary channel for buying and selling GUSD is the Gemini exchange. However, the Gemini dollar is also available to trade on a number of exchanges and supported by many platforms in the cryptocurrency ecosystem. Gemini implements a number of security measures — including full KYC (Know Your Customer) and AML (Anti-Money Laundering) screening — to ensure that GUSD remains transparent, secure, and regulated for its users.
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