Cameron and Tyler Winklevoss say their approach with their new company was to “ask permission” rather than “ask forgiveness.” That’s why they waited for months to obtain licensing from the New York Department of Financial Services before launching Gemini, a bitcoin exchange that will open for trading on Thursday.
Regulation has been the hot-button issue in digital currency recently. In August, a slew of bitcoin companies cut off service to New York rather than apply for a BitLicense, the regulatory hall-pass created by the NYDFS to cover digital-currency business deemed “money transmitters.” The BitLicense went through multiple revisions and remains highly controversial in bitcoin circles.
But a BitLicense isn’t what the Winklevosses wanted. Rather, they sought authorization to operate Gemini as a chartered LLC trust company. To service institutional banking clients, the BitLicense, they say, isn’t sufficient—hence their play for a trust charter. Today, Gemini announced it has received that charter.
Even without a BitLicense, virtual-currency exchanges are expected to meet the requirements of the BitLicense framework, according to an NYDFS spokesperson. (Only Circle, Gemini, and ItBit have received NYDFS exchange licenses.) Deposits and withdrawals are free on Gemini, but the exchange takes a small fee (not yet announced) on trades. Gemini itself cannot provide FDIC insurance, but the bank Gemini is using, Signature Bank in New York, can.
In a lengthy interview with Fortune in July at the Gemini offices in Manhattan, Cameron and Tyler Winklevoss said they had wanted to launch Gemini much sooner, but that the bottleneck of waiting for a charter is exactly what sets Gemini apart. Their aim is to be seen as the most above-board option for buying and selling bitcoin.
“The regulation is why we’re in New York, why we have a bank partner, and why we’ll have a real business when we launch,” says Tyler Winklevoss. “So we’re very thankful.” His brother Cameron, when asked about the companies that left New York this summer rather than apply for licensing (including many exchanges that would have been competitors to Gemini in the state), said, “I think they’re missing out on a really important market. Our view is a little different: it’s to be more mainstream and interact through the front door with regulators. Our approach is going to benefit everybody in bitcoin. An approach where you avoid New York might be more beneficial to you, but I don’t think it actually pushes the entire ocean of bitcoin up.”
How will Gemini “push the ocean” of bitcoin? By attracting both bitcoin newbies and serious banking clients, its founders say. “Wall Street’s not in bitcoin yet, and part of Gemini and the licensing is to get them there,” says Tyler Winklevoss. “On day one when we open, there will be a lot of retail hobbyists, and it will take some building to get the institutional investors.” Eric Winer, Gemini’s vice president of engineering, gave Fortune an early demo of the platform and explained, “We want to make it accessible to users who may not be well-versed in bitcoin; at the same time, we don’t want to dumb it down for the power users.” To achieve that balance, the look of Gemini is clean, simple, colorful—much like WinkDex, the bitcoin pricing index that the brothers launched one year ago. And Gemini uses visualizations to make the process look simple: a user can enter the target price at which they’d like to buy a certain amount of bitcoin, and the site shows them how that will impact the overall volume and market.
The brothers may chafe at the suggestion, but Gemini is also their play for respect, both in the digital-currency world they’ve embraced and in the larger realm of tech entrepreneurs. After making their fame by suing Facebook CEO Mark Zuckerberg in 2008 and winning a settlement of $65 million, many say the twins haven’t made any noteworthy moves. They are angel investors in 52 different companies through Winklevoss Capital, but almost none are big names. (Three have had exits: ride-sharing startup Hitch sold to Lyft; security firm Authy sold to Twilio; and restaurant-ordering app Caviar sold to Square.)
But they have jumped into bitcoin whole-hog: In 2013 the brothers publicly stated that they owned 1% of all bitcoin in circulation. They will not reveal whether that supply has changed, but at current market price, those 146,893 bitcoins would translate to nearly $35 million. In addition to holding a large amount of coin, they have invested in bitcoin startups, launched a pricing index and now an exchange, and are still working on launching an ETF. Tyler Winklevoss says he and his brother spend “110% of our time” on bitcoin.
And yet, many in the bitcoin community still aren’t impressed. One prominent digital-currency executive, speaking anonymously, told Fortune, “I think our industry would prefer that if there’s a celebrity spokesperson, it not be them.” The brothers are predictably cagey on the topic of their own reputation in the space. “I don’t see a lot of skepticism about what we’re doing,” Cameron Winklevoss says. “But I mean, I’m not searching for it.” Tyler Winklevoss is a bit more direct: “We dealt with a lot of skepticism early on, when we first spoke about bitcoin. And a lot of the same people who were literally chuckling at that time are now not only taking bitcoin seriously but trying to find a place to work in it. We’ve weathered a few storms before, like when social networking was considered a fad. I think that we have a track record of being on to something big.”
Gemini enters a market that already has some some established competitors, including Coinbase, which is not licensed in New York, and ItBit, which obtained a trust charter from the NYDFS in May, beating Gemini to the punch.
The twins hope to compete on security. Gemini uses multi-factor authentication via Authy (a company in which they were investors), a ‘cold-vaulting’ system for storage, and a chief security officer, Cem Paya, who has priors working in security at Airbnb, Google and Microsoft. They hired Jules Kroll’s intelligence firm K2 for oversight. They met with regulators at the NYDFS repeatedly to establish a relationship. “We wanted to build with a security-first mentality,” Cameron Winklevoss says. “This isn’t some fly-by-night operation.”
If Gemini can pull banking types to bitcoin buying, the founders also believe it could make them influencers at a regulatory level. “Once we get a foothold in New York and start building a successful company,” Cameron Winklevoss says, “we’re going to have a decent seat at the table, and regulators are going to listen.”
Even if doubts about their reputation makes bitcoin devotees cautious, the twins are betting on the rising price of the currency. And if nothing else, building Gemini, they say, has been “a fun ride.”
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