A New York State regulator has approved separate dollar-linked tokens from Paxos and Gemini which will be pegged to the US currency.
Known as ‘stablecoin’, the tokens will be ‘strictly’ 1:1 with the dollar.
The New York Department of Financial Services (NYDFS) gave the greenlight to the two companies on the basis that the authorised stablecoins remain “fully exchangeable for a US dollar”.
The tokens are designed to provide liquidity for investors trading in crypto assets through a digital alternative to cash.
Gemini said they approval means there is now a “trusted and regulated digital representation of the US dollar that moves in an open, decentralised manner like cryptocurrencies.”
The NYDFS said its approval shows its commitment to fostering FinTech innovation.
“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,” said Maria T. Vullo, Department of Financial Services Superintendent.
Cryptocurrency trading platform Gemini is famously run by the Winklevoss brothers, and their stablecoin will be built around Ethereum. The token will allow clients to convert US dollars into Gemini dollars and withdraw them to an Ethereum address.
“To date, there has been no trusted and regulated digital representation of the US dollar on the blockchain,” said Tyler Winklevoss, chief executive officer, Gemini Trust Company. “We are excited to bring the Gemini dollar to market, a stablecoin that combines the creditworthiness and price stability of the US dollar with blockchain technology and the oversight of the NYDFS.”
According to the blockchain provider, every Paxos Standard token is fully backed by dollars held at US-domiciled FDIC-insured banks.
On the Paxos website, an announcement said: “Today, we tokenized the dollar… Tomorrow, everyone in the world can participate in an open, frictionless, global economy. This is one step on an important journey toward an inclusive and modern financial system.”
“With Paxos Standard, we hope to enable a truly frictionless, global economy by offering a token that is stable, fast, redeemable, audited, and most importantly, approved and regulated. This is a digital asset that can be trusted,” added Charles Cascarilla, CEO and co-founder of Paxos.