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Author Topic: [2019-02-05] Gemini Shuts Down Accounts Over Stablecoin Redemptions  (Read 61 times)
gentlemand
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February 05, 2019, 07:18:22 PM
Last edit: February 05, 2019, 07:45:08 PM by gentlemand
 #1

https://www.coindesk.com/winklevoss-crypto-gemini-gusd-stablecoin-redemption

One for all you 'bankcoin be kill bitcoin becauses it's be betterings' crew.

I think these 'legit' stablecoins are going to become an ever increasing nightmare for both users and issuers. Fiat on top of crypto and back to fiat just adds layer after layer of paranoia and twitchiness. I seem to recall another one refusing redemptions because it would hurt their image. The same happened here. I don't understand why anyone would utilise this when they've been told they won't be able to redeem it.

The entity issuing it not only has to keep their bank from having kittens, they're also going to have regulators basically living inside their mind.

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February 05, 2019, 08:51:01 PM
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How can anyone be surprised about this? It's what people expected to happen initially, then ignored it because the convenience it offered was too good to ignore, and now we're back where we started....

If you play within a field of highly regulated exchanges, you can and should expect this to happen. Centralization on top of more centralization, dohh. I'm sure that we'll see it happen with USDC this year as well.

This might very well be the reason these more reputable stablecoins haven't been used that often for actual on-exchange trades. It's more an off-exchange value instrument.
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February 06, 2019, 02:07:28 AM
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There are two things I don't understand here.

Firstly, GUSD is created when someone deposits fiat on the Gemini exchange, so every GUSD in existence is backed up 1:1 with a dollar deposited. So what's the issue with cashing out? Have they spent all those dollars and now they can't redeem them, or are they literally just refusing so they can manipulate their numbers? Even if they had spent all those dollars, the Winklevoss twins are rich enough to cover it easily.

Secondly, why do people even trust stablecoins? You move to crypto to get away from centralized fiat issued by a government and held in a bank, and then you buy a centralized stablecoin issued by an exchange which you can't even cash out? I just don't see the point.

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February 06, 2019, 02:28:36 AM
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There are two things I don't understand here.

Firstly, GUSD is created when someone deposits fiat on the Gemini exchange, so every GUSD in existence is backed up 1:1 with a dollar deposited. So what's the issue with cashing out? Have they spent all those dollars and now they can't redeem them, or are they literally just refusing so they can manipulate their numbers? Even if they had spent all those dollars, the Winklevoss twins are rich enough to cover it easily.

Secondly, why do people even trust stablecoins? You move to crypto to get away from centralized fiat issued by a government and held in a bank, and then you buy a centralized stablecoin issued by an exchange which you can't even cash out? I just don't see the point.

Their reasoning -  

"a U.S.-based OTC desk told CoinDesk its Gemini account was promptly shut after redeeming several million GUSD. He now believes this was part of Gemini’s strategy to “maximize their status on CoinMarketCap.”

Paxos have done the same for the same reason.

They were issued to certain entities at a 1% discount on the agreement they wouldn't cash out, presumably there are time or proportion limits that are lifted. Still a ridiculous idea and I've no idea why anyone went for it.

It's centralisation on top of centralisation. And all the issuers are so terrified of compliance I expect many people will give up on them. Tether don't really give much of a fuck, or have ever offered much in the way of cashing out, which is why they'll stay relevant.

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February 06, 2019, 03:11:18 PM
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Secondly, why do people even trust stablecoins? You move to crypto to get away from centralized fiat issued by a government and held in a bank, and then you buy a centralized stablecoin issued by an exchange which you can't even cash out? I just don't see the point.

The interesting part is that people don't trust them. It really seems that in order to do their arbitrage trading between exchanges, which seems to be one of the main utilities of stable coins, people are willing to take that risk. On top of that, they don't plan to cash out any of it to fiat anyway, so the risk for them in this case is pretty low.

Most people acquire USDT by buying Bitcoin locally, sell it for USDT on exchanges as Binance, then trade whatever shitcoin, and then later when they are done trading, they go back to Bitcoin. They don't need Bitfinex as exit point, and this is exactly how USDT remains in circulation, which is positive for this market as a whole.

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