As mentioned previously, the Winklevoss twins, Cameron and Tyler, have announced their own Bitcoin exchange,”Gemini“, which is advertised as a,”working with federal and state governments to launch in full compliance with all Bitcoin regulations and consumer protection laws.” This is separate from the brothers’ proposed Exchange-Traded Fund (ETF), which will likely be based on their live project: the Winkdex.
Also, mentioned on the previous page, is CoinX, which could be considered to truly be the “first regulated Bitcoin exchange” in the United States. CoinX does not have the name recognition that the other exchanges have, but it certainly is the closest to obtaining licenses in every state.
Both of these exchanges are at a disadvantage, in a way, as Coinbase has built an enormous userbase since it’s creation, and many of those users will now use Coinbase’s exchange by default. However, they also have their own unique advantages.
The Winklevoss’ Gemini Exchange
Many dub the Winklevoss’ twins projects as “vaporware”, as they have yet to produce any real product outside of the rather simple Winkdex. This is a mistake in my opinion, as the lack of a publicly launched product does not mean that their systems have not been extensively developed. While Coinbase has amazingly raised over $100 million in funding, it is very possible that the Winklevoss twins have access to significantly more capital than that.
Their lawsuit with Facebook supposedly resulted in $20 million cash, as well as 1.2 million shares of Facebook stock. Shortly after that, Facebook underwent a 5-for-1 stock split, which resulted in the twins’ shares multiplying to 6 million.
It is unknown if the twins have kept all of these shares, or sold part/all of them. Even if they sold every share at the lowest price that Facebook stock price dipped since it’s public launch, which was $18.06 in August of 2012, the two would have walked away with ~$108,000,000. If they have held on to the shares, or waited to liquidate some/all until the past year, then the twins Facebook holdings (or cash receives from sales) could be $400 million or more. On top of that, they started purchasing bitcoins when the USD to BTC ratio was still less than $10 to 1 BTC, and have reported that they control over 100,000 bitcoins.
What is the point of this? Simply that they do not have any reason to push an incomplete exchange into the public. They do not have to worry about large investors expecting profit in the near future, nor are they likely to be strapped for cash.
Instead, the two can take their time, ensuring that they have their exchange’s security perfected, licenses obtained, and system completely polished. I do not know when Gemini will launch, nor do I have any insight into when their ETF will become available…but, I expect that when the exchange is brought into the light, it will be fully functional, and available across the entirety of the United States at the very least.
CoinX – Truly the First Regulated Bitcoin Exchange in the US
CoinX hasn’t made waves, and seems to be taking the slow and steady approach to becoming an integral part of the Bitcoin ecosystem. This does not mean they have “missed the boat” or made mistakes. One thing about regulators, and government institutions, that many people seem to overlook, is that they are generally unhappy when companies work around their rules.
Coinbase, and nearly every other Bitcoin-based MSB, has been operating in a grey area for quite some time. Coinbase has been registered as a MSB in all 50 states for quite some time, yet continued to operate without MTLs.
Have you ever engaged in the business of selling, issuing or otherwise dispensing checks, drafts or money orders or other instruments for the transmission or payment of money in the State of Alabama prior to the filing of this application?
If the answer to this type of question is “yes”, then that is an automatic red flag, and could potentially delay approval of a license, or even result in the state refusing to issue a license. However, on the other hand, if a company answered this question with “no”, but the state determined that previous services offered by the company were considered money transmission, then that could result in denial as well.
CoinX has avoided this issue completely by not offering any services to any state until obtaining the proper licensing, and has then partnered with other companies (like Trucoin, as I mentioned before) to use the licensing in a way that offers services in a 100% compliant fashion. Not only do they have the ability to confidently state that they have not engaged in unapproved money transmission in the past, but can also show that they have received licensing in a growing number of states, and have met the requirements to maintain said licenses.
While I fully expect the Winklevoss exchange to launch with licensing in every state, I also would not be surprised if CoinX managed to secure licensing, in every state that requires MTLs, before Gemini launches. However, Coinbase, even with it’s surplus of investment capital, may have a bit of trouble with some of the more strict states.
Coinbase vs. Gemini vs. CoinX
The three companies, as well as the current market leaders in the Bitcoin exchange world, are all vying to reach the top. They all want to be THE dominant US exchange, and every company is taking a different approach to achieve this goal. In the end, there may not be a clear “winner”, as it is quite likely that multiple exchanges will mature into stable, profitable businesses. However, as with every market, there will be a market leader.
Which company will that be? Only time will tell, but the answer may not be as obvious as many believe. Luckily, competition is good, and should result in a better end product for the rest of us.
Full Disclosure: I worked for Trucoin before starting Coin Brief, and have a vested interest in the company. While this certainly causes some level of bias, I try to keep that out of my writing. In this case, my experience with Trucoin, and connection to their team, gives me some level of insight into recent events.