New York state has 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, Reuters reports.
“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,” Maria Vullo, New York state Superintendent of Financial Services, was quoted as saying in a statement on Monday.
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 US dollars on the Ethereum blockchain. It will be strictly pegged to the US dollar on a one-to-one basis.
Paxos’ stablecoin, the Paxos Standard, will also be fully collateralized by the US dollar on a one-to-one basis, the report said.
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 CEO Chad Cascarilla said in an interview with Reuters.
Following news of New York’s approval of the dollar-linked digital currencies, bitcoin briefly climbed above US$6,300 on Monday.
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