As a regulated and secure 1:1 U.S. dollar-backed stablecoin, Gemini dollar (GUSD) plays an important role in the Gemini ecosystem and provides reliable on-chain value.
Over the past year, GUSD has experienced a threefold increase in adoption, with a market capitalization sitting around $600 million as of January 3. In the coming year, we look forward to continuing to integrate GUSD into more Gemini products and the wider crypto ecosystem.
In this blog, we explore GUSD and touch on its core features, including how it’s regulated, how it’s backed, and how it’s being used.
Deep Dive Into GUSD
GUSD is an Ethereum-based ERC-20 stablecoin that combines the creditworthiness and stability of the U.S. dollar with the speed and efficiency of the blockchain.
Stablecoins come in a variety of forms. However, whether their purpose is to retain a peg to the price of a fiat currency, a commodity, or some other asset, stablecoins are typically meant to maintain a predictable value. There are four main ways stablecoin issuers do this, with collateral structures that can be fiat-backed, crypto-backed, commodity-backed, or algorithmic.
GUSD falls into the fiat-backed stablecoin category. Below, we dig further into how Gemini and GUSD are regulated, GUSD’s security features, and how we ensure its 1:1 peg. You can also read the GUSD whitepaper here.
Since its inception eight years ago, Gemini has worked with regulatory stakeholders and lawmakers to help shape thoughtful regulation that fosters both consumer protection and innovation. Gemini Trust Company, LLC is a fiduciary and qualified custodian under the New York Banking Law and is chartered by the New York State Department of Financial Services (NYDFS) as a limited purpose trust company.
As such, GUSD has also been regulated by NYDFS since its first token was minted in 2018, making it one of the world’s first regulated stablecoins. Under NYDFS guidance specific to U.S. dollar-backed stablecoins, NYDFS imposes a number of requirements on U.S. dollar-backed stablecoins to ensure redeemability, segregation of reserves from proprietary assets, and that the reserves are subject to certain attestations.
As a requirement, each account holding funds backing GUSD is separate from our business, operating, and reserve accounts and is established specifically for the benefit of Gemini customers. This ensures that the U.S. dollars backing GUSD are segregated, and that 1 GUSD is always redeemable for 1 U.S. dollar.
Attestations that validate GUSD reserve balances are published monthly by an independent accounting firm, BPM CPA (NY) LLP. The attestations are posted at the bottom of our GUSD page here.
We also invite you to visit the Gemini Trust Center, where you can learn about the funds held on Gemini, our regulatory licenses, corporate structure, and more.
In line with being highly regulated, Gemini must also undergo annual financial and security audits and is subject to bank examinations conducted by NYDFS.
Further, the Ethereum smart contract underlying GUSD itself has been audited by Trail of Bits, a leading information security research and development firm. Gemini was also the world’s first crypto exchange and custodian to obtain SOC 1 Type 2 and SOC 2 Type 2 certifications, which were conducted by Deloitte.
As a U.S. dollar-backed stablecoin, GUSD is backed by hard cash and cash equivalents held in segregated accounts. To ensure this, each GUSD corresponds to a U.S. dollar that is held by Gemini as one of the following types of assets:
- Deposits in U.S. Federal Deposit Insurance Corporation ("FDIC")-insured banks,
- Money market funds, invested only in U.S. Treasury Obligations, or
- U.S. Treasury Obligations.
As of January 3, the breakdown of dollars held in these three types of assets is as follows: 47% in FDIC-insured bank accounts, 34% in U.S. treasury bills, and 19% in money market funds.
GUSD in Action
In late October, we were thrilled that the MakerDAO community voted to approve our GUSD peg stability module (PSM) proposal, locking hundreds of millions of dollars in GUSD on-chain. We believe deeply in the promise of decentralized finance (DeFi) and that the GUSD PSM will continue to both bolster DAI’s dollar peg and strengthen the Maker ecosystem.
GUSD is also one of a handful of assets integrated with Aave, an open source DeFi liquidity protocol.
Despite persistent market headwinds over the course of 2022, we’re excited about what is to come for GUSD in the year ahead, and how it can serve as an on-chain source of value as we continue on our journey to unlock the next era of financial, creative, and personal freedom.
Onward and Upward!