Researcher: Winklevoss Twins Could Freeze The Gemini Dollar (GUSD) At Any Time

In today’s crypto news, there has been a lot of talk about the new dollar-pegged stablecoin founded by the Winklevoss brothers – the Gemini dollar (GUSD). This stablecoin was created in a way to regularize cryptocurrency as a mainstream asset class. However, a lot of analysts and researchers have had their say on its future.

According to one blockchain researcher named Alex Lebed, the Gemini dollar smart contract includes a provision that allows its “custodian” – to freeze any account. Lebed wrote his thoughts in the tech publication Good Audience and noted that GUSD uses an ERC20PRoxy contract that gives Gemini as its custodian a full ability to upgrade the contract once in every 48 hours. This could potentially give people behind the GUSD the power to simultaneously render all tokens non-transferrable.

Even though Cameron and Tyler Winklevoss repeatedly touted GUSD as the first “trusted and regulated digital representation of the US dollar,” it is not surprising that Gemini could have included a mechanism to allow it to freeze funds.

The Gemini dollar whitepaper, however, argues that issuing a cryptocurrency which is tied to physical assets stored in a centralized location involves some element of trust. As the paper outlines:

“Desirable outcomes in a system that relies (at least in part) on trust requires oversight. In the context of a stablecoin, we submit that the issuer must be licensed and subject to regulatory supervision. From this, transparency and examination become requirements of the system, ensuring its integrity and engendering market confidence…. Gemini operates under the direct supervision and regulatory authority of the New York State Department of Financial Services and is subject to the New York Banking Law and other applicable U.
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S. laws and regulations.”

However, according to the NYFDS, Gemini and Paxos (the two new stablecoins) must:

“Implement, monitor and update effective risk-based controls and appropriate BSA/AML and OFAC controls to prevent the Gemini Dollar or Paxos Standard Token from being used in connection with money laundering or terrorist financing.”