The Winklevoss Twins Now Have Approval To Launch Gemini, Their Bitcoin Exchange
Bitcoin exchange Gemini Trust Company has received approval to launch from the New York State Department of Financial Services.
The company, which was started by Cameron and Tyler Winklevoss, is allowed to operate as a chartered limited liability trust company. This is a little different than a BitLicense, which is a type of business license issued by the state's Department of Financial Serivces for businesses that deal specifically with the digital currency bitcoin. Gemini goes live with trading on Oct. 8.
"We didn't apply for a BitLicense because we wanted to build an exchange that both Main Street and Wall Street could use and trust, so we decided to obtain a limited liability trust company charter in order to do so," said Tyler Winklevoss, CEO of Gemini, at TechCrunch Disrupt.
Gemini will handle both bitcoin and fiat deposits. Bitcoin deposits will be stored in offline cold storage and fiat depostis will be storied in a New York-based FDIC insurance-eligible bank. Fiat deposits are paper currency that don't have any intrinsic value, like a gold bar would, but are valuable because the government backing it promises to pay that amount.
Both first-time users and professional traders will be able to use the new exchange, and a fee of 25 basis points will be charged to both buyers and sellers for each transaction. A basis point, equivalent to 1/100th of a percent, in this case applies to changes in interest rates, so 100 basis points would be equivalent to 1 percent. If interest rates are lowered by 25 basis points, that means the government lowered interest rates by 0.25 percent.
Gemini hopes to stand out from other bitcoin exchanges by offering better security and regulatory compliance. Bitcoin itself will be stored in a proprietary multisignature cold storage system. Not only that, but the team is made up of financial security experts who have worked at firms such as Virtu Financial and Bridgewater Associates.
Digital currencies initially were not regulated, but as they gained in popularity there were some abuses and it became clear some regulation and consumer protrection was necessary. The banking industry also sees great potential in bitcoin's underlying computer technology called blockchain, not just as a currency, but potentially as a means to transfer information, including personal property (such as deeds), securely over the Internet. It is a major advance in cryptography.
"It is our hope that digital currency and other innovations in payments technology – together with prudent regulation – will help deliver better service and lower costs to customers over the long term," Benjamin M. Lawsky, superintendent of financial services for the state Department of Financial Serivces, said in June when the final BitLicense framework was announced.