Gemini Dollar (GUSD): A Transparent Stablecoin
The Gemini Dollar (GUSD) is among the first U.S. dollar-backed stablecoins to gain approval from a U.S. regulatory body.
Updated March 13, 2023 • 3 min read
Here, we describe the Gemini Dollar (GUSD) and discuss how GUSD differs from other stablecoins. The Gemini Dollar is strictly pegged one-to-one to the U.S. dollar (USD), and is built on the Ethereum network according to the ERC-20 standard. The Gemini Dollar combines the creditworthiness and stability of the USD with blockchain technology. Gemini and the GUSD benefit from the direct supervision and regulatory oversight of the New York State Department of Financial Services (NYDFS). Gemini began issuing Gemini Dollars on September 9, 2018, making the GUSD among the first regulated stablecoins in the world.
GUSD as a Transparent Alternative to Earlier Fiat-Backed Stablecoins
In contrast to bitcoin (BTC) 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 (NYDFS). 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.
Each GUSD corresponds to a U.S. dollar that is held by Gemini as one of the following types of assets: (1) deposits in accounts at U.S. Federal Deposit Insurance Corporation ("FDIC")-insured banks; (2) money market funds, invested only in U.S. Treasury Obligations, or (3) U.S. Treasury Obligations. The U.S. dollar cash portion of these GUSD reserves, which may be held at State Street Bank and Trust Company, Goldman Sachs, or Fidelity may be eligible for FDIC “pass through” insurance for Gemini customers in the event that the bank holding such U.S. dollar cash deposits becomes subject to resolution or similar proceedings by the FDIC.
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.
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, anyone may view GUSD’s transaction history along with its current price, market cap, and other pertinent data on an Ethereum network block explorer such as EtherScan or EtherChain (bear in mind that GUSD is an ERC-20 token built on the Ethereum network). Using such a block explorer, all parties can openly view the total number of GUSD in circulation at any given time, which encourages a system of mutual trust between Gemini and its users.
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 (see all exchanges and platforms). Gemini implements a number of security measures — including full Know-Your-Customer (KYC) and Anti-Money-Laundering (AML) screenings — to ensure that GUSD remains transparent, secure, and regulated for its users.
Cryptopedia does not guarantee the reliability of the Site content and shall not be held liable for any errors, omissions, or inaccuracies. The opinions and views expressed in any Cryptopedia article are solely those of the author(s) and do not reflect the opinions of Gemini or its management. The information provided on the Site is for informational purposes only, and it does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. A qualified professional should be consulted prior to making financial decisions. Please visit our Cryptopedia Site Policy to learn more.
Is this article helpful?