Winklevoss Twins Say Stablecoins Are Still Missing Their "Facebook Moment"

Hello Defiers! Earlier this week Tyler and Cameron Winklevoss, CEO and president of the Gemini exchange, respectively, sat to chat with The Defiant about everything from crypto in the pandemic, to Libra and stablecoins, to DeFi and their ETH holdings. The transcript and podcast link are below.

We all know the famous twins: Olympic athletes, their legal fight over the origins of Facebook, their reinvention into crypto entrepreneurs, founding one of the most successful exchanges in the space, and amassing enough wealth to become Bitcoin billionaires, which is also the title of a book about them.

Tyler and Cameron Winklevoss are playing the long game. While competitors rush to list the latest token and engage in dubious schemes to boost volume, they’ve taken a more conservative approach with their exchange Gemini, and with their stablecoin, the Gemini Dollar. They’re able to shake off lower volumes than some because they’re not sprinting at the start of the marathon. They want to move at the pace of compliance and regulation — Gemini is a New York trust company one of the few exchanges to operate under the state’s BitLicense.

Image source: Twitter

Besides, they say, the stablecoin race hasn’t really started yet. They’d rather see greater adoption when there’s finally a crypto app that breaks into the mainstream and needs a stablecoin for payments, than compete with coins inflating their balance sheets.

The twins said it may very well be that Facebook’s stablecoin Libra will be the global, digital means of exchange, and if that’s the case, they’d be happy to welcome it on Gemini —they’ve put all “past beef” behind, and are more interested in advancing the crypto revolution.

The twins said governments’ and central banks’ response to the pandemic is driving a new wave of adoption into crypto, from people who are realizing the current system is broken and are seeking an alternative.

They see promise in DeFi and consider integrating with protocols so that their exchange can offer more than just buy, sell, store. It’s time to start actually using crypto, they say, and that includes lending and staking. They consider decentralizing part of their stack, and even creating a Gemini Dex, though those plans sound to be for farther out in the future.

And as for their ether holdings? The Bitcoin billionaires said they their ETH holdings are “sizable” and “in the same galaxy” as their BTC holdings.

🎙Listen to the interview first hand on this week’s podcast. You’re a paid subscriber (thank you!) which means you also get a full transcript.

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Camila Russo: I want to get your impressions of how crypto has reacted in this pandemic and what is looking to be the greatest economic crisis since the Great Depression. We've seen exchanges report an increase in volume and activity, and I'm wondering if that's also been the case for Gemini.

Cameron Winklevoss: We've definitely seen an increase in interest and activity. Obviously in March there was a big sell off, so there's a period of time where every asset was sort of going down and people were trying to just stay above water. But I think now that the dust is settling a little bit more the Bitcoin story around a digital gold store of value, safe haven and basically protection against what a lot of people think will be inflation from the money printing, that's driving a lot of interest. And we've seen actually the Bitcoin price has recovered quite a bit since the pre pandemic. I think the halvening has also created a lot of interest because people, even outside Bitcoin and crypto, have been saying, What is this thing? What does this mean? And then they start to understand that the money supply and the schedule is deterministic. And so I think that's drawing people in. So I think overall we have seen an increase level in people looking, especially for Bitcoin.

CR: Can you give me an idea in numbers, like what was percentage increase compared to the same period last year or something to better gauge what the real impact has been of this crisis?

Addicted Economy

Tyler Winklevoss: Yeah, I don't have the numbers off the top of my head, but our APIs, are public. But I think if I remember correctly, May of last year there was some interesting volatility in price action and Bitcoin was around 5,000. We were kind of at the heart of crypto winter and then all of a sudden the price started creeping up a bit and people got excited and that was kind of short-lived until maybe June of last year. And then we were kind of in, again, crypto winter until the pandemic. Bitcoin was obviously hurt in the beginning, but there was a lot of volatility which was good for exchanges. But as Cameron mentioned, when the dust settled and people saw all this money printing, the deficit spending, the debt ballooning across the world, and then all of a sudden Bitcoin's supply schedule is cutting in half during the halving, that's in stark contrast to all the other fiat regimes and governments and people are looking at the current system and saying, Hey, this thing —excuse my French— is kind of f*cked.

“People are looking at the current system and saying, Hey, this thing —excuse my French— is kind of f*cked.”

And we've been pressing the turbo button for the last decade. Running a deficit, ballooning debts in a bull market with no war, or no major war at least in the US, which is the exact opposite of what you want to do. You want to keep your powder dry, spend less, take in more revenue, so you're prepared for when the pandemic comes. We did everything we shouldn't have done. And what do we have to do? We have to double down again to get through it. And it's sort of like, this chronic drug addict that just has to keep going for more, for a bigger dose, bigger dose, (getting) more hooked. And how does that end? It usually ends in rehab or, or worse.

CW: Bitcoin's rehab.

TW: The Genesis block inscription in 2009 was the '08 crisis and then the inscription in the one before this halvening is all the money printing. So it continues and it can't end well if we don't turn it around. The only problem is turning it around isn't easy, especially during a pandemic. So there aren’t many great options for fiat regimes. Even the best option is pretty bad. People are seeing that and they're saying, What's the alternative? And they've heard about this thing, Bitcoin, with fixed supply and its supply schedule is cutting in half and it's predictable. It's deterministic, it's transparent. No one can change it. I’m of loving the predictability and the math of that system versus this other one that's very Wizard of Oz, like, who's the man behind the curtain? And so for a lot of people, that's been the catalyst of, I'm going to try this other thing out because this current system I think is about ready to melt down.

CR: And are your main clients, I understand they're larger volume traders, more enterprise leaning, is that right?

CW: No, it's actually we have customers across the spectrum from retail individuals to institutions and programmatic traders and market makers. We have the Gemini mobile app is a very sort of retail-focused individual focused product. Super easy. The the goal is to be simple, accessible, and secure. So I think that there's perhaps a perception in the market that Gemini is more of an institutional focused platform. And it's actually not the case. We're very much focused on the entire market. And we have tools for individuals. And we also have tools for traders and companies that need more sophisticated stuff.

CR: Okay. And the reason I was asking was I'm wondering whether the kinds of questions that you're getting from institutional clients right now, are they different from what you've seen in the past two to four years? I mean, driven by the same kind of catalyst that we were talking about before. Are you seeing you maybe institutions that hadn't looked at Bitcoin before come to you and express their interest for the first time?

TW: Yeah, I mean, 2017 was really interesting because a lot of the people we were trying to get meetings with for so long and had been sort of closing the door or not even opening it, now they were banging down our door and they were obviously asking about Bitcoin, but also about all of these other crypto projects and the questions were more FOMO-based. Like, what's happening? Have you heard about this new thing, this project and this ICO. And it wasn't a lot of quality, it was like frenzy and FOMO and sort of fear-based anxiety of missing out. This time around it's much more like, Hey, I'm starting to get the Bitcoin gold framework story. I believe Bitcoin is a better gold or has gold qualities.

It has the qualities that make gold valuable. And in the current climate, I see this as a great sort of vaccine to the disease of money printing. So 2017 was like, have you heard of this ICO? It was like the ICO craze and that's great because a lot of people came into crypto, but it's also concerning because a lot of people can get burned and it just doesn't feel as real. This time around, it's a more of a Bitcoin-centric conversation and people really buying into the Bitcoin is gold or better than gold story, and trying to find a hedge to all of the potential hyperinflation that's going to be coming in fiat regimes, much how gold was a good hedge to the inflation of the 1970s. And that was what Paul Tudor Jones mentioned publicly. You know, he made the gold trade back in the seventies and today Bitcoin reminds him of the way to hedge out to the current economic climate right now.

CR: So you're seeing maybe this crisis leads to people looking at Bitcoin and crypto more for their actual fundamentals than some temporary frenzy that's going on with with price action.

TW: I think that's fair. When sophisticated players come and ask you about these ICOs because they missed bitcoin, they missed ether and then they're like looking at I don't know, the Telegram ICO or something that's raising capital, like billions of dollars, and the investment minimum is like $20 million and very sophisticated people, but not in crypto are asking you about it, that's very scary and different and it's not really fundamental bases. Versus now people being like, I actually believe in Bitcoin. I understand what makes Bitcoin, Bitcoin. I believe in that technology, how can I get some? And my answer is always, of course come to Gemini, we can help you. So it's not even like we're not even selling them on it. They're already sold on it. It's just how do I get involved? How to engage, how do I custody this thing without getting burned? You know, because everyone's read about the hackings and whatever. So it's a narrow conversation, but it's more real and grounded in fundamentals and it makes rational sense as opposed to, you know, the FOMO conversation.

Bitcoin Paved Way for DeFi

CR: That's encouraging. So I want to get your opinions on DeFi. You know, I saw obviously that you recently listed all these Ethereum based tokens, some very related to DeFi with Dai and Link. And it's been the biggest trend happening on Ethereum for the past year or so. It seems like it's so different from the space that you've traditionally dealt with, which is very much the regulated crypto side of things. And DeFi is just very out there, trying things, breaking things, not regulated at all and in fact, moving in the opposite direction, decentralizing everything. So I'm really interested in your views on this space.

CW: Happy to talk about that. When we first found Bitcoin in 2012, it was a Wild West space. There was no regulation. In fact, most regulators probably had no idea it existed. If you went to them and started talking about virtual currency or crypto they'd think you're speaking a foreign language or something. So it was an interesting time. And there was a lot of sort of experimentation and innovation and iteration. And then we kind of realized that, or decided that, in order to mainstream Bitcoin, we have to bring thoughtful regulation. Otherwise it's not going to go mainstream and people are going to get hurt. And we saw that firsthand with Mt. Gox. So I think that, you know, in the early parts of technology, there's perhaps an iterative phase and then the better experiences come along that are safer and more user friendly.

And that was a lot of the ethos behind Gemini. It was building trust in this new asset class. First earning it, which takes time a lot of time, and then maintaining it with your customers. We're only five years into the Gemini adventure. But it's a very short amount of period of time in the scheme of things. I think DeFi is a new vista, a new type of system for which Bitcoin paved the way, it was sort of the blueprint for decentralization. Like, this is what's possible. You can take something that's centralized and make it decentral. Bitcoin was the starting point. We spent a lot of time where the past couple of years trying to build in trust into that new system.

And we're very excited about DeFi and that system. But it's earlier and so it's harder to say how necessarily it will evolve, but I think the first step is creating a safe way for people to get into that system through Dai, for example, which is a fundamental building block. So offering Dai to our customers was important. Now what they do with it of course, up to them. They may use it in DeFi, they may use it somewhere else. But that's kind of the first step. DeFi is a very interesting space and it kind of speaks to our general vision around crypto. Crypto offers greater choice, independence and opportunity. That's what draws us to crypto. And that's what's so exciting about it. You know, Bitcoin gives you this alternative. If you're looking at the fiat systems and fiat regimes and you're really concerned you can start going into Bitcoin, this other system. If you don't have access to US markets maybe DeFi is an opportunity for you. So yeah, we're very excited about it and we'll look to continue to support projects that are in the DeFi ecosystem.

“DeFi is a very interesting space and it kind of speaks to our general vision around crypto. Crypto offers greater choice, independence and opportunity. That's what draws us to crypto. And that's what's so exciting about it.”

Potential Gemini Dex

TW: We're very much a centralized exchange right now technologically. Because DeFi couldn't do some of the volumes that a lot of our customers are used to. Just the engineering trade offs of de-centralizing an exchange versus centralizing are very different. So the liquidity, the volume, all of that stuff is harder to do. I don't think the technology is quite there. When you think of like CryptoKitties, the success of CryptoKitties, basically DDoSing the Ethereum blockchain, try putting through high-frequency traders, market-makers, billions of dollars of trading volume through a DeFi exchange –the technology would just fall over. So just because we started here doesn't mean as technology gets better, some parts of our stack, of the Gemini stack, like the settlement or the exchange, couldn't move to being more decentralized. Or maybe there's a future where we have like, Hey, if you want to be on the centralized stack and trade, we have this product here. But if you really want to go like non-custodial and decentralized, we've got this other exchange product over there.

And you have to remember, to connect the main land of finance to this new technology, some of them will require knowing their counterparty. So JPMorgan may not trade on an exchange that isn't centralized and regulated and they know who it is. Just like for a stablecoin, they may be more attracted to the Gemini Dollar, which is essentially an issued stablecoin that can be used in DeFi, but it's issued by a company that's regulated by the New York department of financial services. They may want to do business with that stablecoin, while Dai is way too exotic. They appreciate it, they understand it. But from a compliance, legal, regulatory standpoint, they actually can't touch it even though they think it's fantastic.

So it's really important as a community for us to have a couple of different options. There's some people who won't touch the Gemini dollar, it's not for them. But there's such a spectrum of customers and what their needs are and we have to meet them and it can't be done by only one stack or one piece of the spectrum. It may be a hybrid and maybe fully centralized, maybe fully decentralized. And I'm just very open to those possibilities and the fact that it's just not going to be a one size fit all.

CR: Super interesting to hear, we might see a Gemini DEX in the future. As you're looking at this possibility, have you looked at Layer 2 solutions on Ethereum that could maybe make this more feasible? There are now things like Optimistic Rollups and is ZK proofs technologies which are making an exchange with higher volumes on Ethereum possible. Recently, I don't know if you know Synthetix, it's a synthetic assets issuing and trading platform. They did a demo with Optimism, which is a research group doing Layer 2 stuff and they've been running this Layer 2 exchange pretty successfully with, I think, thousands of transactions per second. So it's a huge increase from a fully on-chain Dex. Wondering whether you've been looking at these solutions and what you think about them if you're eventually looking to build your own Dex.

TW: Yeah, I can't say I'm familiar with those projects specifically, but you've definitely given me some good homework. You know, I think the technology will get there. Is it here today? I don't know. But I think I'm an optimist. I think it'll get there tomorrow. And of course Gemini is thinking about many different things like including a Dex. It's just a matter of sequencing it and timing it, right. Like is the Dex revolution, is it two years out? Is it five? Is it 10 years out?

You know, in the early internet, YouTube couldn't really happen before it happened, right. We just didn't have the throughput, the compression, the technology. I remember my early experience on the internet downloading a webpage took like a minute, like the picture, line by line. It was painful. And then email was painful until people built easy to use applications like Gmail. I mean even AOL was great cause it helped onboarding people into those a walled gardens and it got people connected up and you know, the muscle memory of getting online. So yeah, everything's on the table. It's all possible. It's just a matter of when do we get to it on our roadmap.

Token Listings

CR: And talking about the kind of things that you are able to do right now, like listing these tokens that we mentioned on Gemini. Is this a change in strategy for you because you've, I think traditionally been very kind of slow to list different tokens compared to other US exchanges, and of course even even more so compared with exchanges outside of the US. You've been very judicious before adding any more tokens to your exchange. So does this represent a shift into maybe opening up your exchange to a higher quantity of tokens?

CW: Well, we're definitely going to be adding more projects, both crypto to the platform as well as adding more fiat currencies over the next year. I think one of the things to note is that we're the first exchange and maybe only exchange in crypto to ask for permission and not forgiveness. We waited to get our license to operate and we have to build at the pace of regulation and what we call the pace of trust. And I think every other exchange in the world does not do that. And the biggest ones in the world definitely do not. A lot of them don't KYC, they don't have the obligations that we have. And so they can list a hundred assets without having to do the work or getting the approval and that's just not the game we're playing.

“We're the first exchange and maybe only exchange in crypto to ask for permission and not forgiveness.”

And I think quite frankly, there's a lot of projects starting in 2017 that weren't real. We want to always avoid to the best we can listing a project that we have to delist or listing a project that doesn't really have a community behind it, and there's a big problem with a 51% attack or a fork or something like that. We're very conservative in that regard. And I think the other way to view it is, this is a marathon and we didn't sprint in the first mile because we really wanted to make sure that we have the right pace. We've got the right equipment and we're doing it the right way and building that sort of trust brand and ethos. And that's the game we're playing which we call the long game. We're trying to build a company that is, you know, innovating in crypto for the next a hundred years or more. There's many businesses in crypto today that are limited-time only, that are here today and may not be here a year from now for a variety of reasons. And that's just not the type of company we're trying to build. There's a lot of money to be made, perhaps a lot of volume, a lot of trading. But that's not what we're in it for.

TW: We actually we listed ether pretty early on. It was clear to us it was a real project. So it's not really a departure from our strategy. It's just our strategies takes longer to play out because we want to follow the rules. We want to play by the rules, we want to get the right permissions. We want to make sure something's not a security before we trade it. And if you make that mistake, if you're wrong, that can be enforcement actions, fines, all sorts of problems. So our end goal is the same, but how we get there is very different from other exchanges. And I think that's what sets Gemini apart, frankly.

CR: Besides listing tokens, have you considered or is it in your plans to integrate with other protocols like Coinbase recently integrated with lending protocols to offer interest rates on crypto deposits for users? Is that something that you consider or that you're planning to do?

Lending and Staking

CW: We're definitely considering it. Allowing our customers to earn interest or lend and the ability for customers to stake, we're examining all those things. And I would imagine in the future we are offering a lot more to our customers than just, you can buy or sell or store crypto. That's kind of the first use case, the first step. But all of the things that you mentioned we're looking into.

TW: Super important in this environment with zero interest rates, maybe negative interest rates, potentially hyperinflation, the ability to earn yield anywhere like 5%, 6%, whether it's staking or you know, a DeFi money market. But the ability to earn is super important. We talk about the phase one use cases of crypto: buy, sell store. Well we have to, at some point, we have to get to use. Use, spend, earn, all of those other verbs. You know, I don't know how long the list is, but we're only at like the first three. We got to get a few more and so look for that in the next, you know, year or coming months as we try and get into more verb use cases of crypto.

“We talk about the phase one use cases of crypto: buy, sell store. Well we have to, at some point, we have to get to use. Use, spend, earn, all of those other verbs.”

CR: That's really interesting. Well I think what's really driven so many people into DeFi so quickly is this ability to actually use their crypto for all these different verbs that you're mentioning. So it is super attractive to to do something like have a dollar-based digital asset have it passively gain interest. I think that's something that has the potential to attract a wider user base, especially now.

TW: It's what finance in fiat currency used to be like. When I was growing up, you'd actually put your money in a bank and earn on it, but that's not happening anymore. So people are gonna have to find other ways to do that.

CR: Is there any specific protocols that you're looking at or that you think are more likely for you to work with?

TW: So, one thing to add is we trade now something like eight protocols, but we actually custody something like 23 and you can find the full list on the Gemini website. I'm just pulling that up now, but I believe we custody the 0x protocol and a bunch of DeFi tokens that power to the DeFi revolution. But over time we'll look to both list for trading and custody. Not just Layer 2, but also Layer 1, new protocols. We've mentioned publicly upcoming support for Filecoin. Which I think is super interesting, a decentralized. Amazon S3 bucket web storage system, which is I think pretty important to decentralize the decentralized revolution, whether it's finance or just the whole thing. So it will be a mix between the sort of Layer 2 tokens but also the Layer 1.

Compound Finance

But we want rigor and merit behind these projects. Like Orchid's a real team going after a real problem, the Brave browser with BAT, real team, real problem. Chainlink bringing real data onto the blockchain. Like smart contracts are pretty cool, but they're not that cool in a vacuum, they need to interact with the world around us, whether it's the Yankees game, the weather, an event, it can't just be this self-referential blockchain vacuum echo chamber where we are all like, "yay, crypto," with each other. It's actually gotta connect with the real world. And then of course, Dai is that beautiful medium of exchange that’s sort of the grease, the oil that ties it all together. It's one of them. The Gemini dollar is another one. I guess you can call ether tokens digital oil.

So it's really a combination of these projects, but we want real projects, not like the FOMO, shitcoin, white paper created in a coffee shop that's complete vaporware. And it just gives crypto a bad name. You know, the whole Lambo crowd. Like, Lambos are cool, great, get a Lambo, but have technical merit, have a purpose, have a real “why.” And that's what makes the Gemini experience a little bit different. We're curating that in a way that's thoughtful and I think that's more than other exchanges can say for themselves.

CR: Sure. No, but I was thinking more along the lines of something like Compound, you know, which doesn't really have a deeply tradable token. I mean, it does have the COMP governance token, but it's not like really used for speculation or trading, but it does have this this protocol that's being used as a money market for lending and borrowing different assets.

TW: Compound's great. A great project. We're familiar with it. That is the kind of project that Gemini would look to integrate with more deeply.

Stablecoin Race Hasn’t Started

CR: And I wanted to ask you mentioned obviously GUSD. Are there ways for GUSD to gain a more active role in DeFi? Like Coinbase has been really active in DeFi, investing USDC in different DeFi protocols. So are you considering taking any of those initiatives with GUSD to maybe have it be more used within the ecosystem.

CW: GUSD can be sent anywhere on the Ethereum blockchain, so it's available really for anybody to use in DeFi. We continue to look for interesting use cases for it being used. But it's also, you know, it has to come organically from the community. I guess there's always a little bit of a push and pull. But yeah, I guess the short answer is that Gemini dollar was built to be used in DeFi and we hope it continues to have uptake and people come up with cool projects that use it.

CR: What do you mean by that? By saying that it was built to be used in DeFi?

CW: Well, what I mean by that is, while it's centralized, meaning that the dollars are held in a bank and it's not decentralized, backed by collateral like Dai, it is an open standard ERC 20 token on the Ethereum network, so it can travel anywhere the internet goes basically. So it came out of the box if you will, ready to be used in dapps and decentralized financial applications from the get go.

TW: Right. There's a use case for stablecoins of like inter-exchange arbitrage and getting it listed on all these exchanges. But that's not really that important to us. You can play that game, but that's not really the promise of it. When Wall Street wants to start investing in decentralized finance, they'll need a currency. When a decentralized REIT pays off a dividend or a stock, is it going to pay it to investors in ether? Probably not because of the volatility, but in a stablecoin. So my suspicion is that, the game hasn't even started. We're not going to try and put our assets on balance sheet. A lot of these stablecoins, they just put their own cash deposits to goose up the assets under management to give this perception that it's bigger than it is. I think it's kind of bullshit. People see through it.

“A lot of these stablecoins, they just put their own cash deposits to goose up the assets under management to give this perception that it's bigger than it is. I think it's kind of bullshit. People see through it.”

Missing Crypto’s Facebook Moment

These coins were meant to be spent. I think the metric that really matters is the velocity necessarily, than trying to build like a cash ETF via stablecoins. So, you know, I think that decentralized finance, as there's more applications that people use… I mean what needs to come first, the stablecoin or the application that needs the stablecoin. And I'm not sure that the application that needs a stablecoin other than trading on an exchange exists. If someone creates decentralized Uber, well heck, you're going to need a stable coin. But I don't see that mainstream killer decentralized app right now that all of my crypto and non crypto friends are coming onto blockchains to use. Like what is that decentralized Twitter moment or Facebook moment?

Like Facebook brought people in, Friendster, My Space, that was a movement, right? Social media. People aren't going to move on to DeFi because the currency's there, it's the applications. And so I'm not seeing it. Maybe I'm missing it, but what is that crazy… it could be a game. It could be literally just a game that people need something to spend in. I'm not seeing it there. So we're patient. I'm not sure that the game for stablecoin dominance has really started, but we're certainly not going to waste time faking our numbers by putting up balance sheet capital to look good. You're not fooling anyone.

“What is that decentralized Twitter moment or Facebook moment? (…) I'm not sure that the game for stablecoin dominance has really started.”

CW: Just to further build on the thought. Phone cameras continue to get better and better because people started in the early 2000s wanting to post photos online in social networks and things like that, starting with Friendster, My Space and hence forth. And so that sort of social networking drove the phone on the camera probably, it was more of a pull rather than, you know smartphone developers being like, Oh, we've got to keep iterating on that camera. There had to be a need for it other than, you know, it's not really about just having a lot of photos on your camera roll. It's about actually being able to post them and use them online. So I think, to Tyler's point, as the use cases develop and continue to pull the need for things like a Gemini dollar or stablecoins more and more, that's going to be driving it more, I think less so about, well if we just build one more stable coin, we're going to use them more. Now we have to like build these DeFi apps that, you know, suck the need for stablecoins.

Libra on Gemini

TW: The question is, stable coins, at least ours, is tied to US dollars. I don't know, maybe they think differently about the U S dollar today than they did two months ago. And they're like, I'm not going to touch that stablecoin because I'm going to go to Dai, because it's algorithmic or even Dai has sort of a soft peg to the dollar. So you know, anything can happen. But we didn't get into this game to make the lives of sophisticated high frequency traders like their job easier. It's great if we can do that. But allowing them to arbitrage price dislocations between exchanges is not the future end game of the stablecoin. And that's pretty much like the only thing I've seen going on. And like the fact that Tether, where's Tether right now? Is it like 5 billion, 6 billion and climbing? I mean the fact that that's like the biggest stablecoin given all the issues with it, that we all know publicly and privately. I think it's sort of says it all. Like the game hasn't really started. We've got a great product but we can't do it alone. There's gotta be other building blocks out there. And look, maybe it's Libra. Maybe Libra will come along and that will be the stablecoin of all stablecoins and Gemini will trade it and that will be the global, digital stablecoin.

“Maybe Libra will come along and that will be the stablecoin of all stablecoins and Gemini will trade it and that will be the global, digital stablecoin.”

CR: That's interesting to hear you say that, given all your history.

TW: Yeah, look, we had differences like 20 years ago, but that chapter's closed and it's separate and apart from Libra and Facebook, the company, and Gemini, the company. We have a responsibility to our employees. I have responsibility more to crypto and the revolution than any past beef I had with an individual. That's water under the bridge. The chapter's closed. We're on to much, newer more exciting ones. So yeah, that's a total possibility. What's for sure is that we don't how this will all unfold, how the world will, but like we need to put enough bets on the table, work on cool projects, bring the smartest people in the room, in the world into this movement and make it happen because the world needs crypto and Bitcoin more than ever.

CR: I want to go back to the Libra point though. Do you think if Libra were to finally happen and they got over all the regulatory issues, is a stablecoin on this kind of permissioned chain, which is somewhat centralized, what this revolution is really for? Wouldn't you hope for a more decentralized option?

TW: It's not, and if that's what it is, it's probably not a part of what we're talking about. If you go back to the first white paper incarnation of the idea, it was unclear if it was going to be on an open blockchain. It was still an open question, but it was a question that was open nonetheless. So we all were hoping that that it would be open and decentralized or maybe centralized but able to use on decentralized blockchains. But if it's centralized for like a WeChat currency, it may be very helpful for people and do well, but I'm not sure it'll be a part of what we're talking about.

CR: I also wanted to go back to your previous point you made about how the stablecoin race hasn't really started yet because we haven't seen the mainstream app that's driving everyone to crypto and driving the need for a stablecoin really?

TW: I mean, that's part of it. But remember most of crypto is happening off blockchain right now. Like most of the volume like Gemini, whether it's BitMEX, Coinbase, Binance, as far as I know, those are all side pockets off the blockchain.

Pipes to Wall Street

CR: You mean because it's on custodial, centralized exchanges?

TW Yeah, it's a ledger entry. So all that is not even happening on the blockchain yet. When more of that action moves on chain, then it matters more to have a stablecoin. The other thing is the SEC hasn't approved any exchanges for trading security tokens. So we trade virtual commodities and Gemini, we have a license pending for an ATS broker dealer to trade securities here. But we can't trade regulated security tokens that live on a blockchain yet on Gemini. We can do Bitcoin as it's commodity, it's not a security and ether the same.

Much of Wall Street is waiting for this property to come up. This regulated by FINRA, the SEC, they can trade securities and do that stuff. So that money hasn't really come in yet. So the pipes to Wall Street connecting into the blockchain or even a company that's on the blockchain but as a ledger like Gemini, still hasn't quite happened yet. So the idea of like creating a decentralized ETF or like I want to buy a share in the Dunkin Donuts on my corner and some of downtown Manhattan, a little bit of Brooklyn, I'll create a basket. That whole concept hasn't really started yet.

“The pipes to Wall Street connecting into the blockchain (…) still hasn’t quite happened yet.”

CR: For the regulated, SEC regulated, Wall Street space, right? Because that is happening to some extent in DeFi, you know, owning a piece of real estate or owning a derivative of gold or an ETF even. I mean they are building these like baskets of tokens…

TW: Like Decentraland right?

CR: Yeah, I mean that's even crazier than just a derivative of foreign currency or an ETF, which is already happening in DeFi. But you're right, it is a really interesting point that, we are still missing that piece for the regulated side, regulated exchanges, for Wall Street to really have that connection to crypto and be able to trade digital securities.

Stablecoins for the Metaverse

CW: Talking about Decentraland I was actually going to bring that up because using payments like a stablecoin can only be used in a type of metaverse, right? You can't use credit cards and existing fiat rails. So I think as those worlds expand, and then you look at the world of Fortnite, it continues to go more and more digital. You see people like logging into Fortnite to go watch an electronic music concert. I mean, it doesn't get more meta than that. So as people live more online I think that's an area where stablecoins for example could really flourish or could pull like the demand, but it's so early. There's a period where we had the internet and we were connected to the internet, but still a lot of media was still being moved around via hard technology such as like floppy disks and CD ROMs.

Yes, you could go onto the internet, but it wasn't actually... Wikipedia didn't exist yet. You were probably using a CD rom encyclopedia Britannica to do your research on certain topics. And more data was probably being pushed around through floppy disks and hard media than actually the digital pipes. But as compression got better and scalability got better, and I think we're going to see that with DeFi, all these protocols are going to get infinitely more scaled and then you're going to be able to do a lot more. So there's going to be an intermediate period. Where it's sort of, are we centralized or decentralized? Are we a little bit in between? And maybe the end point has like a combination. It's like a collage of all of it, depending on your needs, which is phenomenal because we're coming from a system and a world that's totally centralized, that's your only option. And so I think we're, we're heading in that direction, but it's still pretty new.

Digital Collectibles

CR: Yeah. I wanted to mention what it says there on your t-shirt the Nifty Gateway. That kind of connects with the digital assets digital world that we're talking about. Is that your way of getting your foot in that in that area.

CW: Yeah. So DeFi is one sliver of the amazing possibility of like decentralization and another is art. Nifty Gateway is a marketplace for digital collectibles, and art, and goods, with a focus on art right now. And scarcity that's enforced by the blockchain and you can authenticate art. We've all heard so many stories about counterfeits in the world of art and fakes and this or that, and you don't really have a sense of transparency or authenticity. So it's a really fascinating area that we're excited about. Gemini owns Nifty Gateway. We acquired it last summer. It was our first acquisition.

TW: Yeah. I mean, the first incarnation of crypto as we know it, Bitcoin, lets put gold on a blockchain, decentralized it, the ICO, we saw people trying to put tokens, utility tokens, securities. And it's just a natural progression to put other assets like art and collectibles up there. Nifty Gateway is a bet on that progression, but also on human nature. People love collecting things. It's part of the human spirit. We all grew up collecting comic books or baseball cards and maybe you graduated into fine art and other things, but these assets should be on blockchains too, just like the key to your car or to title to your home. And it's super exciting. So yeah, that's what Nifty Gateway is. It's the infrastructure and security underneath it is underpinned by Gemini.

So the Gemini cold storage system, the same custody that's holding Bitcoin at Gemini is under the hood holding your collectibles and art at Nifty Gateway. And it's super cool for artists, because you know, a lot of the art world is centralized and there's gatekeepers and there's like power brokers and galleries who anoint you and they allow you to exhibit. And there was a movement at some point where people were like, let's move art outside. It doesn't have to be in this four by four wall in Chelsea, in New York, we'll do an installation outside because we don't want to be constrained by this system. And then there's been a movement of art to the street. Let's just do street art. And I think that that art ultimately is already starting to move on to blockchain.

And so an artists' gallery is now the internet. It's not a room with four walls and a couple of cities around the world and how much foot traffic and eyeballs and you need to be there in person and the gallery has to give you permission to do it. Now all of a sudden you can display or exhibit your work to the entire world and anyone can pay with crypto or credit cards, we make it easy for fiat. So your gallery is the internet and it's very democratic. Because anyone can find your art, the art speak for itself and the customer makes their decisions. It isn't like paternalistic in the sense of, the museum told me this is cool, or you know, so-and-so gallery told me this is what I should care about. You can make that decision for yourself.

$200 Billion Market

CR: Right. I think it's an interesting space and I love how it really changes the concept of digital ownership into something users and holders actually own. Unlike, you know, what's been traditionally the case with with in-game items or other kinds of digital goods where the game developer was the one who owned your stuff. And if the company shut down, then you lost everything. But in this case, this Ethereum standard makes it so that you can own these unique pieces, you know, these unique tokens.

CW: It's phenomenal. I mean the, the, I think something like $200 billion is spent in e-games, in-app, per annum. And that's probably the size of crypto today. It's enormous and it's all centralized. And to your point, there's no real control. The user has no ownership or control over those items. This is a very large economy or Federation of micro economies that could all be strung together through crypto.

TW: Yeah. And they will. I think all of the centralized, closed environments of game publishers, they're aware of NFTs, they're aware of the open blockchain. And I think deep down they realized at some point they're going to have to open their worlds up and allow access to be interoperable between different games and different universes. Right now we have AOL, Prodigy, Copy Serve these different walled gardens of stuff. But in the future that's going to come down. We're just going to have the internet, but there's going to be money, DeFi and goods. I'd rather own land in a metaverse than many other places in the real world.

Generation Crypto

CW: And so would Elon Musk, right? He's given up all his possessions and he's going to Mars.

TW: And I'd rather have a lot of, you know, if I was going to cash, I'd rather be in Dai, than a lot more than many government currencies out there. Generationally, I never have a millennial or anyone under the age of 40 come up to me and be like, I don't believe in Bitcoin. It's always like, I love Bitcoin. I'm so into it and they want to tell me like this cool thing they're working on or whatever. So they're already sold. They grew up in a digital world. They don't care about green paper. People over 65 don't get it. But that's okay. Not everybody does, you know, it's hard to disrupt yourself at 65 when you've accumulated this skill and this asset and climbed to the top of a mountain and all of a sudden people are telling you, Hey, that mountain, that's no longer relevant. You gotta go and climb this one. You don't want to walk down and walk back up. I get that. I hope I'm not that person at 65, but there's a good chance I will be like, No, crypto is so cool. That new thing, that sucks, if that's even possible. But so, it's happening. I couldn't be more bullish about the space.

Bitcoin ETF

CR: And then I wanted to briefly shift gears before we wrap up. You know, you were the first proponents of a Bitcoin ETF. You've been pushing for this for a long time, where is at battle now, is it lost? Is the goal now maybe doing a digital Bitcoin ETF like you mentioned. Where are we now in that?

CW: Well, right now there's no ETFs getting through. I'm not even sure if there's applications pending with the Commission. We do not have one pending with the commission right now. We first filed in the summer of 2013 almost seven years ago. And it was kind of amazing because it was I think right around July 4th and it's an ETF product, right? Most people don't know what an ETF is or it's just this boring financial product. And it really struck a chord. When we filed, I think it was covered in every major newspaper around the world and trending globally on the internet. But it's very much part of the long game. And we've always known that. The ETF is a mainstream product for Main Street

And so you have to make sure that the underlying market for Bitcoin is safe for people to buy an ETF because it's the whole point is it's so easy to access it has to be a safe product. And the Commission has stated that in a couple of different ways. I think that there absolutely will be an ETF. I don't think it happens right now in this current environment. But we're still, you know, committed to pursuing it and we'll do what we can. Part of what we're doing is building a regulated marketplace to help the price discovery, the liquidity and the integrity of crypto markets. We can't do that entirely by ourselves, but as crypto becomes more and more liquid and more and more regulated, I think it becomes closer and closer to ready for an ETF product.

CR: Okay. So you haven't given up yet?

TW: No, it's definitely a when, not an if, but the big question is when is the "when." This Commission's been conservative about Bitcoin ETFs and the standard that they set through our disapproval ruling in 2017 hasn't been met in our opinion by the market and probably won't be for a little while. Now, the Commission could change. It could change over during this next election cycle and they could be a more open or a little bit less conservative. Hester Peirce would green-light the Bitcoin ETF if she could. If she was all of a sudden the chairwoman of the SEC, then you know, the Bitcoin ETF would be sooner rather than later. But it's just kind of depends on the posture of the commission. It's a judgment call ultimately on their end.

The standard that they've set hasn't been met by the market, even though the disapproval was 2017. We haven't done enough work as an ecosystem, as an industry to assuage their concerns of market manipulation on the underlying market. We've tried to create the SRO Virtual Commodity Association to address that, but it's very hard to get buy-in because it's a lot of work and it's a longterm payout and a lot of people, especially in crypto, are just very short term.

“The standard that (the SEC) set (to approve a Bitcoin ETF) hasn't been met by the market.”

CR: I guess we'll have to be patient with that one.

TW: We'll keep fighting the good fight, but there's no quick fix.

ETH Whales

CR: I wanted to ask you this question. Hope I'm not putting you in an awkward position, but I have a large Ethereum-based following. You have been very public, large Bitcoin holders and wanted to ask you whether you have any ETH holdings and whether you can say if they're large holdings or not.

CW: We definitely own a lot of ether. They're large and it's a material amount. Yeah, quite large.

TW: Yeah, we haven't talked a whole lot about ether that way. But Gemini I think was one of the first US exchange to list ether back in 2016 and Andrew Cuomo actually did the press release of approval. So we're big fans of ether. Like Cameron said, we have a material amount, I think it's safe to say material by any person’s standard, like anybody's wealth amount.

“We’re big fans of ether. We have a material amount.”

CR: Compared to your Bitcoin holdings. Can you say, is it half, the same?

CW: Same universe. Yeah, same galaxy. It's sizable. Yeah, it's not a couple of ETH. A couple years back we made a concerted effort to buy a lot of ether.

CR: Oh wow, so you're ETH whales as well as bitcoin whales.

TW: Yeah.

CR: And this is something I like to end my episodes with. What's the next big thing that listeners should expect from Gemini coming up.

CW: I'd say more tokens and more fiats. Can't really speak to the tokens other than Filecoin, we've spoken about supporting that and we'll be supporting that around the time of the mainnet launch, which I think is slated for later this summer. And then the fiats I believe our first will be the British pound and the Euro will follow shortly thereafter.

CR: Great. Tyler, anything other than these new listings, that's exciting that you're looking forward to?

TW: You know, unfortunately nothing I can say specifically publicly, but we just recently did a partnership or banking relationship with JP Morgan. We have a lot of very cool strategic partnerships coming up. One we'll be announcing at the end of this month. And then a couple more coming over the next couple of months. So Cameron said tokens, currencies, more features, but also some really cool strategic partnerships. So the next six to 12 months, 18 months for Gemini is very exciting roadmap. I think it's going to be our most exciting year yet. So stay tuned.