Bitcoin exchange Gemini Trust Company LLC received authorization from the New York State Department of Financial Services to start operations, the latest startup to step its toes into a market that’s gone through upheaval.
The exchange was founded by Cameron and Tyler Winklevoss, who claimed Mark Zuckerberg stole their idea for a social-networking website to start Facebook Inc. The twins have moved on to become entrepreneurs in the bitcoin industry, built around a software-based currency that can be used to trade anything from electronics to illicit items on the Internet.
Gemini is the second bitcoin company to be designated by the agency as a trust; exchange ItBit Trust Co. gained approval in May. The Winklevoss duo have said that the lack of a regulated market is responsible for the volatility in the price of bitcoins versus other currencies. Mt. Gox, a Tokyo-based bitcoin exchange, filed for bankruptcy in February 2014 after disclosing it couldn’t account for several thousand units of the virtual currency. Gemini will be secure, and offer protection against fraud and money laundering, the pair said in a statement Monday.
"Bitcoin is an island right now and Gemini is building a bridge to the financial mainland," Tyler Winklevoss, Gemini’s chief executive officer, said in the statement. "We wanted to build an exchange that both Main Street and Wall Street could use and trust."
Moving money into and out of Gemini accounts will be free, the company said. A trading fee, currently about 25 basis points of the value of the trade, will apply to both the buyer and seller, it said. The exchange will be open for trading from Oct. 8.
Gemini’s status as a chartered limited liability trust lets it operate nationwide without having to apply for money-transmitter licenses from individual states that require them. It also lets the company potentially offer a variety of other services for institutional investors, such as hold assets in collateral in transactions.
"Having a trust charter can increase the confidence of institutional investors in purchasing bitcoin for investment purposes and for trading bitcoin," said Houman Shadab, a professor of law at New York Law School, said in an interview.