Cryptocurrencies backed by stable fiat currencies, like the U.S. dollar, made huge waves earlier this summer.
They're called "stablecoins," and they're a way to potentially blunt the notorious volatility of cryptocurrencies - an issue that profoundly affects the viability of using crypto as an "everyday" medium of exchange. You wouldn't want to draw a paycheck in crypto, for instance, or even buy a gallon of milk with it, because the value gyrates wildly almost by the hour.
Stablecoins make an end run around that problem. Even better, they provide a way for regular investors to hop in and out of crypto positions with little "friction" and take full advantage of the "good stuff" cryptos have to offer: international acceptance, ease of use, security, and privacy.
They're outrageously popular, too. For a time this summer, before its well-publicized troubles, Tether did more daily volume than the greenback.
Now stablecoins are coming back - the right way. And they're doing it all aboveboard, in the light of day, with some serious backing and the OK of U.S. regulators.
That's great news for folks who want to invest or use more crypto in their day-to-day. But it could be even better news for folks holding one coin in particular...
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For the Winkelvoss Twins, the Third Time's the Charm
After two bitter goal line rejections from regulators regarding their Bitcoin exchange-traded fund, the Winklevoss brothers changed the direction of their attack.
It's working: The creators of the cryptocurrency trading platform Gemini have recently received permission from New York regulators to launch a "stablecoin."
The "Gemini dollar" is the first crypto asset from the Winklevoss twins and is now approved by the New York Department of Financial Services (NYDFS). The Gemini dollar is backed by U.S. dollars that are held at State Street Bank in the United States, "and eligible for FDIC 'pass-through' deposit insurance, subject to applicable limitations."
The Gemini dollar is designed to provide liquidity for users wishing to send or receive U.S. dollars through the Ethereum network - more about that in a minute.
All the transparency you'd want is there. The public will even be able to review the company's independently audited bank holdings on a monthly basis.
A main benefit to such a coin is to help solve any time-delay issues when moving between the always-open crypto markets and the time-restricted fiat ones. As it stands now, "If there's a price dislocation in a certain market and it's a Friday night, traders can't move fiat currency until Monday," Tyler Winklevoss told Forbes.
Now, trading of the Gemini dollar began last week, and the Winklevoss brothers have dubbed the coin the "world's first" regulated stablecoin to launch...
... but there's just one little "problem" - a pretty sweet one, as it turns out...
At the End of the Day, It Doesn't Matter Who's First
Trust company Paxos is also claiming the same title.
You see, Paxos received regulatory approval on the same day as Gemini, making the same "world's first" claim.
"Paxos Standard" is an Ethereum blockchain-based stablecoin also backed by the U.S. dollar and approved by the NYDFS.
In fact, the coins share many similarities, including dollar deposits that are held in FDIC-insured U.S. banks, issued by trust companies, and that moniker - "world's first."
So, if there were a race for the first regulated crypto assets, it'd be fair to call this one a draw.
There's even a third stablecoin on Ethereum's blockchain entering the market.
Carbon has launched CarbonUSD (CUSD), a stablecoin that was built with compliance in mind, on full legal groundwork.
After some questions about the Tether stablecoin this summer, CUSD was designed to be as compliant and transparent as possible. Third-party acquisitions will be conducted by auditor Cohen & Co. in order to maintain transparency.
It also partnered with Prime Trust in Nevada - the bank that will facilitate the fiat deposits - to ensure that all the legal matters were completely considered.
Happily enough for everyone, CUSD founders and backers aren't worried about being "first" or sweating competition with Gemini dollar and Paxos, because of their unique algorithmic model.
Not only is CUSD fully collateralized and redeemable for fiat currency. It also offers whitelisted (WTO) tokens - tokens that can be reused to birth new CUSD as collateral.
You see, if and when CUSD reaches a $1 billion market cap, it will transition to a hybrid algorithmic model. This means it plans to whitelist its stablecoin into a meta-token structure once CUSD has proved its scale and liquidity.
A meta-token is much like a share in the underlying project. Meta-tokens are used to tie profits to a decentralized application (dApp) and reward participants through both appreciation and accruing profits from the company or dApp itself.
So what's most interesting about Carbon and its big ideas for this new stablecoin is it saw market criticism and found a way to strengthen its product. CUSD's transparency and compliance will help people trust it even after the problems with Tether, and Carbon's innovation will bring it big profits.
Why I Think Even Bigger Crypto Profits Are Coming
As a passionate crypto enthusiast and trader, I couldn't be more excited about Gemini, Paxos, and Carbon. They'll fill an important market function, and anything that boosts crypto's accessibility, transparency, and "regulatability" will only be positives in the long run.
But it could very well be Ethereum, which underpins all three stablecoins, that has the most to gain. The market's second largest coin tends to move along with Bitcoin, but that hasn't been the case lately; Ethereum's on a tear right now.
What's more, a series of critically important rulings are expected from the U.S. Securities and Exchange Commission. You can get more details here, but they concern some of the biggest players in finance, like BlackRock, VanEck, Direxion, and Morgan Stanley, all of which could throw as much as $6.9 trillion into cryptos like Bitcoin and Ethereum. It could be one of the biggest crypto catalysts ever seen - and I'm watching.
See Why Bitcoin Is Far from Dead (and How It Could Make You a Millionaire)
At our recent Bitcoin 20x Summit, we uncovered information that left many folks stunned - and re-evaluating everything they thought they knew about the crypto market.
You see, while Wall Street and Fortune 500 companies continue to badmouth Bitcoin, they're diving headfirst into this craze... and I'd bet not one in 10,000 people know the reason behind it.
Go here to see why Bitcoin's not dead... and how it could make you millions.
About the Author
Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.