Blockchain

Gemini Have The Option To Freeze Its New USD – Pegged Cryptocurrency At-Will

Gemini Have The Option To Freeze Its New USD – Pegged Cryptocurrency At-Will

Gemini will release the Gemini dollar (GUSD), and much has been said during the past days about the stablecoin. Created by the Winklevoss twins and can help regularise cryptocurrencies as a mainstream asset class.

A few days ago it was announced that The Winklevoss twins, the founders of the cryptocurrency exchange Gemini, have now seemingly received approval from New York authorities to launch the ”Gemini dollar” stablecoin. The Gemini dollar will be developed on the Ethereum network, will follow the ERC20 token standard, and will be pegged 1:1 to the US dollar. The most important part is that the cryptocurrency is the first regulated stablecoin to launch and has received a green light from the New York Department of Financial Services (NYDFS).

In an interview with Forbes, one of the twins stated that he hopes that the Gemini dollar will assist in solving issues associated with time delays between around-the-clock cryptocurrency markets and time-restricted fiat currency markets.

Ledger Nano S - The secure hardware wallet

It seems like there is much good news around this new asset. However, a discovery by Alex Lebed showed that Gemini could freezy any user account at-will. Alex performed a code review on the smart dollar contract and found that the code for GUSD specified that they could freeze users accounts which is contrary to what the decentralised assets are made for originally. This means that Gemini’s dollar I somewhat centralised.

GUSD uses an ERC20Proxy contract that gives Gemini, as the custodian, the ability to upgrade the contract once every 48 hours, giving it among a myriad of other things the power to simultaneously render all tokens non-transferable.

This statement confirms that Gemini wants its token to exist alongside and within mainstream finance, not outside of it.

The Gemini dollar (GUSD) Whitepaper argues that because it is a stablecoin and pegged to the USD, a centralised asset stored in a centralised location, it must have some elements of oversight.

“Desirable outcomes in a system that relies (at least in part) on trust requires oversight. In the context of a stablecoin, we submit that the issuer must be licensed and subject to regulatory supervision. From this, transparency and examination become requirements of the system, ensuring its integrity and engendering market confidence…. Gemini operates under the direct supervision and regulatory authority of the New York State Department of Financial Services and is subject to the New York Banking Law and other applicable U.S. laws and regulations.”

Regardless of the regulatory aspects of the coin, many cryptocurrency enthusiasts may find this arrangement as corrupt, but according to the Twins, a stablecoin needs some regulatory elements. 

Image Source: “Flickr”

Ledger Nano S - The secure hardware wallet