New York regulators approve dollar-linked cryptocurrencies

New York regulators approve dollar-linked cryptocurrencies
© Dimitrios Kambouris/Getty Images

New York regulators on Monday approved new digital currencies linked to the dollar proposed by the Paxos Trust company and the Cameron and Tyler Winklevoss-founded cryptocurrency firm the Gemini Trust company.

Gemini’s digital currency, the gemini dollar, is a stablecoin that lets users send U.S. dollars via ethereum, a digital asset that helps facilitate digital contracts. The gemini dollar will be tied 1-to-1 to the value of the U.S. dollar.

Paxos’s stablecoin, called the paxos standard, will also be worth one U.S. dollar, and will be collateralized by the dollar.

ADVERTISEMENT

New York state regulators said that the new coins are evidence that cryptocurrency firms can comply with regulatory standards meant to protect consumers. Consumer welfare has been a chief concern in the space as regulators have grown weary of the scams that have proliferated via cryptocurrency.

“As the financial technology marketplace continues to evolve, New York is committed to fostering innovation while ensuring responsible growth," said New York Department of Financial Services Superintendent Maria Vullo. "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.”

Many cryptocurrency advocates say that they have welcomed the crackdown on bad actors as a useful step in the legitimization of cryptocurrencies. They hope these types of steps will ultimately lead to wider adoption.

The gemini dollar and paxos standard are only the latest attempts to address the issue of volatility in cryptocurrency markets.

Developers and investors in cryptocurrency have acknowledged the need for a digital currency that doesn’t fluctuate wildly in value as bitcoin and ethereum infamously have in the past.

Over the past 12 months, bitcoin has soared from just over $3,500 to heights of $19,000 before coming back to around to around $6,000.

Other groups have introduced their own stablecoins, one of the most prominent being tether, which has been plagued by allegations of being involved in cryptocurrency market manipulation. Tether has disputed those allegations.