At Gemini’s launch, the Winklevoss twins said they meant to bring security and legitimacy to the virtual currency payment process, which has been rattled by a number of hacks and alleged fraud at major exchanges.
New York financial regulators have granted a charter under state banking law to Gemini Trust Co., an exchange based in New York City for virtual currency such as bitcoin.
To help fight concerns over security in light of the bankruptcy of the now-defunct bitcoin exchange Mt. Gox, triggered by the loss of about $500 million worth of the cryptocurrency, the newly minted limited liability trust company (LLTC) will custody the majority of its bitcoin deposits in an offline storage system. This differs froma BitLicense-a new business license issued by the NYSDFS for businesses that deal with bitcoin.
“Meeting the high-water mark of banking compliance is no small task, especially for a startup, but we felt that doing so was crucial – Bitcoin is an island right now, and, if we are going to build a bridge to the financial mainland, then Gemini must look and feel as safe, secure and compliant as any other top tier financial institution in the world”, Cameron Winklevoss said in a post to the Gemini blog.
“Even though this path was more costly and time-consuming, it was necessary to fulfill our goal of serving institutional customers”, Tyler Winklevoss said.
Gemini, which will enable users to buy, sell and hold bitcoins, will first start operating in 27 USA states. In February 2014, it launched its own bitcoin index, the Winkdex.
The digital currency was once used for illicit transactions, especially on websites like Silk Road, which has since been shut down by federal law enforcement. In September, 2015 DFS granted the first BitLicense application to a virtual currency firm, Circle Internet Financial.
Both bitcoin and fiat currency transfers and withdrawals through the company are free with a trading fee of 25 basis points of the value of a trade applying to both the buyer and seller. The other, ItBit, received their trust charter this past spring according to The Wall Street Journal.