What it means
Gemini was founded in 2014 and launched its exchange in 2015. It lets customers trade digital assets such as bitcoin and ether for US dollars and other assets, and it offers services such as custody, which means storing assets on a customer's behalf.
Like other exchanges, it matches buyers and sellers through an order book and earns money from trading fees. A key feature of the platform is its regulatory status.
It operates under a New York trust company charter overseen by the state's financial regulator, which sets rules on capital, security, record keeping and anti-money laundering checks. This approach is intended to give customers more comfort than an unregulated venue offers, though regulation does not remove all risk.
For businesses, an exchange like Gemini can be a way to buy digital assets, convert them back to cash or hold them in custody. The finance team needs to look at fees, daily limits, the speed of bank transfers and the controls over who can approve withdrawals.
It also needs clear records of every transaction for accounting and tax purposes. The platform has also issued a digital token pegged to the US dollar, known as the Gemini dollar.
Such stablecoins aim to hold a steady value and make it easier to move money on the exchange. Their safety depends on the reserves behind them and the quality of the issuer's reporting.
The nuance is that using an exchange adds counterparty risk. Assets held with a custodian are not in your own control, so you depend on its security and solvency, and the legal protections that apply can differ from those for bank deposits.
Any business holding digital assets should check these protections and diversify its arrangements.
In practice
Real-world examples.
Example
A small online retailer wants to accept payment in digital assets and convert it to dollars each week. It opens an account on a regulated exchange and sells the assets at the market price. The finance team records each conversion as a separate transaction with the fee shown.
Example
An investment club decides to hold a small amount of digital assets and chooses an exchange with custody services. The club's treasurer sets rules that require two members to approve every withdrawal. She files the exchange statements with the club's accounts.
Example
A corporate treasurer reviews the risks of keeping company funds on an exchange. She limits the balance held there to what is needed for the next month. The remainder stays in the company's bank account.
Formula
Calculation
Total cost of a purchase = trade value + (trade value x fee rate)
Effective cost per unit = total cost / number of units received
Suppose a company buys $20,000 of bitcoin on an exchange at a fee of 0.40%. Fee = 20,000 x 0.0040 = $80, so the total cost = 20,000 + 80 = $20,080. If the trade delivers 0.50 bitcoin at an executed price of $40,000 each, the net amount received is 20,000 / 40,000 = 0.50 bitcoin, so the effective cost per bitcoin = 20,080 / 0.50 = $40,160. The fee rate and price here are assumptions for the example.Case study
Seen in the real world.
Driftwood Analytics is an illustrative, fictional software company that received a customer payment in digital assets worth $50,000. The finance manager had no existing process for such receipts and needed a place to hold and convert them.
After reviewing several exchanges, she chose a regulated platform and set up a policy. The policy covered who could open the account, the maximum balance, how often assets would be converted to dollars and what records needed to be kept.
In the illustrative result, the company converted the payment within a week at a cost of about $200 in fees. The policy also gave the auditors a clear trail, and the finance manager noted that the real work was the controls, not the trading.
Watch out
Common mistakes.
- Assuming that a regulated exchange removes all risk, when price swings, hacking and platform failures can still cause losses.
- Keeping large balances on an exchange for long periods, which increases exposure to the exchange's failure.
- Failing to record each purchase, sale and fee, which makes accounting and tax reporting difficult.
Questions
People also ask.
Who founded Gemini?
It was founded by Cameron and Tyler Winklevoss.
Is Gemini regulated?
It operates as a New York trust company under the oversight of the state's financial regulator, and it is also subject to other rules that apply to its activities.
Are digital assets held on an exchange insured like bank deposits?
Generally no, since bank deposit protection schemes do not usually cover them, so the terms of the exchange and any private insurance need to be checked.
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