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The Paxos Standard Token (PAX) of the Paxos Trust Company and the Gemini Dollar by the Winklevoss Brothers’ company Gemini Trust, received a significant boost after being approved by the New York Department of Financial Services (NYDFS).
The Stablecoin Allure
Stablecoins (cryptocurrencies that maintain a “stable” value unlike their volatile counterparts) remain a grey area. While several businesses have sought to provide similar solutions, none have succeeded. Presently, Tether and TrueUSD dominate the market, but Tether has attracted scrutiny for illicit claims and printing money without adequate funds to back it.
With demand for a credible stablecoin growing, the Winklevoss Brothers of Gemini Exchange have worked to create a reputable option. The brothers hold several blockchain patents in Gemini’s name and are known to adhere to legislative policies on digital tokens strictly. As such, they announced the Gemini Dollar in August this year. It is available to all users on their Gemini Exchange. The token is pegged to the USD 1-1 and is based on the Ethereum blockchain.
Similarly, Paxos (a blockchain technology company focused on crypto-solutions and DLT research) announced its native stablecoin, the Paxos Standard Token (PAX), in July 2018. It is also pegged to the USD 1-1.
Approved by New York Watchdog
Importantly, the two tokens were approved for operation by NYDFS on September 10, 2018.
Maria Vullo, Superintendent of the New York State Department of Financial Services, said in a statement:
“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.”
The coins began trading on their respective exchanges – Gemini and ItBit – on September 24, 2018. Binance, the world’s largest crypto-exchange by daily traded volume, will list the Paxos Standard Token in the coming weeks.
Observers of the cryptocurrency market draw parallel to traditional finance products. The absence of “hedges,” (a vehicle to safeguard against losses) is a berated topic within the crypto community. Backed by a stable real-world resource, such as fiat money, gold, or real estate, stablecoins serve as a hedging vehicle in the volatile digital asset ecosystem.
Although technical needs fueled the innovation, financial businesses like Paxos and Gemini view stablecoins as an essential component of the crypto market. The Winklevoss twins expressed their thoughts in the above regard in a blog post:
“When we founded Gemini over four years ago, our mission was simple: build a bridge to the future of money. As a first step, this meant making it safe and easy to buy, sell, and store cryptocurrencies.”
Meanwhile, Paxos CEO Charles Cascarilla added:
“In the current marketplace, the biggest hindrances to digital asset adoption are trust and volatility. As a regulated Trust with a 1:1 dollar-collateralized stablecoin, we believe we are offering an asset that improves on the utility of money.”
The 24/7 operation of crypto-trading means the lack of a trusted, globally-used, and regulated “digital representation of the dollar” that provides decentralized liquidity.
Contrary to Tether, both Gemini and Paxos issued separate statements confirming actual deposits backing their respective tokens. Gemini confirmed that all Gemini Dollars will be held at a well-known U.S. bank and would be eligible for deposit insurance under the Federal Deposit Insurance Corporation. In its turn, PAX’s USD reserves will be held by the Paxos Foundation. Traders using the ItBit exchange or its over-the-counter desk will have the option to cash out their digital assets to PAX instantaneously.