The Winklevoss Twins have been making waves over the past few days with a marketing blitz for the pair’s Gemini cryptocurrency exchange. Utilizing taglines including “Crypto Needs Rules” and “Crypto Without Chaos,” the duo have irritated some within Bitcoin and other cryptocurrency communities by presenting Gemini as the legitimate face of cryptocurrency. Gemini is one of the few exchanges to have obtained a license to operate within New York. New York City has been at the epicenter of a promotional campaign that includes posters, billboards, a full-page ad in the New York Times, and a Reddit Ask Me Anything (AMA).
The Winklevoss Twins (or Winklevii, as they were memorably dubbed in The Social Network) announced the launch of Gemini in January 2014, describing it as “a fully regulated, fully compliant, New York-based bitcoin exchange for both individuals and institutions alike.” In July 2014, New York State Department of Financial Services brought in a requirement for all virtual currency operations offering services within the state to acquire a Bit License. Gemini awaited regulatory approval before Twelve entities have so far been granted a Bit License or charter, with Gemini becoming the second company to be awarded a charter in 2015. Today, Gemini is one of very few methods for New York residents to legally interact with cryptocurrency.
The latest marketing campaign has focused heavily on Gemini’s regulatory compliance and the Twins’ belief that “revolutions that build a lasting set of rules for a better future are the ones with the greatest chance of success.” This has sparked some backlash among some within cryptocurrency communities, who see regulatory compliance and governmental overview as being anathema to the financial revolution Satoshi Nakamoto envisioned with the creation of Bitcoin.
Revolutions Need Rules…?
The centerpiece of the Winklevii’s recent marketing push has been a full-page ad in the New York Times with the header “Revolutions Need Rules.” While the full text of the advertisement is difficult to track down online, Tyler Winklevoss followed up on the ad with a Medium post outlining “Gemini’s Principles for the Crypto Revolution”. The five principles of the Winklevii are:
1. Working alongside regulators to establish “thoughtful” cryptocurrency regulation
2. Operating with approval of government and regulatory bodies – “Ask for permission, not for forgiveness”
3. Valuing security over profit, and providing a platform free of hacking or fraud
4. Being principled and transparent
5. Bringing crypto “to the people and places that need it most.
The Medium post has been widely shared and debated online. Outlining the first principle – “Play By the Rules” – Tyler Winklevoss detailed the types of rules and oversight with which Gemini is compliant, including “a partnership with Nasdaq to implement Nasdaq’s SMARTS Market Surveillance technology to monitor the Gemini marketplace.” This type of market oversight has attracted predictably negative responses from strong believers in Satoshi Nakamoto’s vision of a form of finance beyond the reach of governmental control. The most upvoted comment on the /r/ethtrader subreddit’s discussion of the post compares the “Revolutions Need Rules” tagline with the contradictory newspeak of George Orwell’s 1984: “War is peace. Freedom is slavery. Ignorance is strength. Gemini Centralised permissioned exchange is revolution.”
The Winklevii responded to a question about market oversight’s potential Orwellian overtones in their Reddit AMA session:
“Q. Marketplace Surveillance” sounds Orwellian…isn’t this contributing to the Surveillance State, where every purchase you make is known to the “authorities”? This is what crypto was intended to prevent, no?
A. I know, it sounds worse than it is, lol. The term suffers from a branding issue, but it’s not Big Brother. Marketplace Surveillance is commonplace in equities and derivatives markets — so we aren’t re-inventing the wheel here, just bringing best practices into crypto. “
This response seemed to do little to satisfy Redditors misgivings, with the top-voted response attacking the Winklevii’s downplaying of the term:
“”Marketplace Surveillance” sounds like exactly what it is. I’m pretty disappointed to hear you think it’s an issue with branding… You’re recreating the exact same problems Bitcoin was meant to solve and it’s heartbreaking to watch you (and others) do it.”
Much of the Gemini marketing campaign has been centered on Manhattan’s Financial District. A brief survey carried out on passers-by there by Breaker suggests a much more receptive view of Gemini’s rule-bound revolution within their target market: “out of the four people who responded to my Billy-on-the-Street-style pestering, three expressed interest in the idea of a more regulated cryptocurrency exchange.” One quoted interviewee within the article suggests a measured amount of enthusiasm for Gemini’s approach:
“I’m intrigued about what’s to come in terms of the right regulation, because for me there’s going to be regulations regardless,” said Alec Cohen, who walked past the advertisement on Fulton Street around 10:45 a.m. He admitted his job as an executive in “internet services and tech consulting” meant he knew more than the average person about crypto. Cohen “wouldn’t say [he’s] excited about regulation per se,” but he is excited about the “overall potential” of more mainstream cryptocurrency adoption.
And the article also makes clear that committed crypto enthusiasts aren’t the intended audience for the ad campaign:
Chris Roan, Gemini’s head of marketing, wrote to BREAKER, “We put significant time and resource into hyper-targeted media on ongoing basis, but we believe this campaign can help bring new investors into the category.”
But some of the strongest negative reaction to campaign stems from a feeling that the Winklevii are striking a pseudo-revolutionary tone to enrich themselves. An opinion piece on Bitcoinst.com suggests that Gemini has a captive market thanks to the New York State Finance Department’s strong stance on cryptocurrency licensing, and that they are therefore benefiting far more from regulatory oversight than any of their potential customers:
“…regulations protect Gemini above all, keeping the ‘non-regulated’ competitors at bay. Meanwhile, users must hand over their personal information to Gemini in order to access the platform in accordance with know-your-customer (KYC) rules… So who’s actually protecting whom here?”
The Bitcoinist piece is particularly scathing about Gemini’s introduction of Gemini dollars, the exchange’s US dollar-backed stable coin. In their recent Reddit AMA, the Winklevii explained that their goals for the Gemini dollar extend far beyond the typical use of US Dollar Tether, which traders on other crypto exchanges typically move their funds into when they want to secure profits or guard against volatility in the valuation of other cryptocurrencies:
“We built the Gemini dollar to bring U.S. dollars onto the blockchain. From there it can potentially power decentralized apps and crypto native services. Yes, it can also be used for money transfers, but we view it more about powering a new future than competing w/ existing payment networks built on legacy banking rails.”
The Age of Gemini?
The Winklevii clearly have grand ambitions for Gemini. In the opening to their Reddit AMA and on the Medium post outlining the exchange’s principles, the Twins openly state that they are hoping to create a “Centurion”: a business that will survive for a hundred years or more. They are also still committed to pursuing their long-thwarted attempts to create a Bitcoin or cryptocurrency exchange-traded fund (ETF), which is widely considered to be more attractive to established investors than taking in the risks associated with being custodians of their own private crypto funds.
In August 2018, Cameron Winklevoss announced via Medium that Gemini was joining the Virtual Commodity Association (VMA), a self-regulatory organization (SRO) aimed at providing oversight and promoting investor confidence in the United States’ crypto markets. When asked about the VMA’s plans for the upcoming year during the Reddit AMA, the Winklevii made it clear that they see this as a necessary step toward securing approval for their long-proposed ETF:
“VCA is looking to establish pillar leads, comprised of subject matter experts across various industries, for each of the Sound Practices (e.g. market surveillance, custody, market based rules)… These rules will form the basis of how crypto exchange[s] and custodians should conduct business, fostering customer protections and transparency… these rules are a direct response to the SEC’s concerns while evaluating ETFs for approval, around market manipulation and lack of transparency.”
The SEC – the United States’ Security and Exchange Commission – is the entity responsible for determining whether or not the Winklevii’s long-term goal of a cryptocurrency ETF will ever become reality. And the Breaker article on their New York ad campaign suggests the SEC may be the real target of this latest marketing blitz:
“…maybe the “value prop” of these advertisements isn’t really targeting “humans walking the streets of NYC,” as The Block’s Mike Dudas puts it. It could be targeting regulators, the Winklevii raising their hands high like the class brown noser, saying to the SEC that’s blocked their ETF multiple times, “Look, we’re legit. We like rules, and we’re playing by the book.””
But Breaker suggests this won’t be easy, linking to an article on a November speech by SEC Chairman Jay Clayton in which he stated that Bitcoin and other cryptocurrencies fail on “at least two of the SEC’s standards for approving an ETF: A reliable way for the underlying asset to be kept safe (what’s known in industry parlance as ‘custody’), and freedom from price manipulation.” Flatly rejecting a comparison between the volatility and market manipulation within cryptocurrency and price fluctuations within the share price of established companies such as Amazon and Microsoft, Clayton said:
“Those stocks traded on exchanges where there were rules and surveillance designed to prevent manipulation… Those kinds of safeguards do not exist currently in all of the exchange venues where digital assets are traded.”
One of the core goals of Gemini seems to be establishing the kind of safeguards that are seen by Clayton and the SEC as a necessary precursor to the Winklevii attaining long-awaited regulatory approval for their ETF.
The Winklevii’s AMA also saw them field several questions related to their stance on Bitcoin in relation to other cryptocurrencies. Their responses show a firm belief that Bitcoin will long remain the most important cryptocurrency:
“Bitcoin is certainly the OG crypto! It’s hard to defeat network effects — so in terms of ‘hard money’ (i.e., store of value) Bitcoin is most likely the winner in the long term.”
The Winklevii have previously stated that they see $40,000 Bitcoin – ten-times its current market price, and double its all-time high – as not just a possibility, but a low-end bullish prediction. When asked whether they still believe this, their response couldn’t have been clearer:
“Our thesis around bitcoin’s upside remains unchanged. We believe bitcoin is better at being gold than gold. If we’re right, then over time the market cap of bitcoin will surpass the ~7trillion dollar market cap of gold.”
When it comes to adding additional cryptocurrencies to Gemini, its clear from an answer related to Gemini’s listing of Zcash that Bitcoin is foremost in their thoughts:
“Zcash is a fork of Bitcoin so it is part of the Nakamoto family tree. Privacy technology is very important to an open and democratic society and the Zcash team is pioneering some amazing privacy technology.”
They also weighed in on Bitcoin Cash Satoshi Vision spearhead Craig S. Wright’s claims that he is Satoshi Nakamoto: “It’s probably not Wright to believe he is Satoshi.”
As is typical of AMAs with major public figures, some of the most heavily upvoted questions were ignored. These include questions over whether Gemini was looking at listing NANO, as well as whether they were enjoying the fact that their purported nemesis Mark Zuckerberg of Facebook has become a figure of public hatred and ridicule. There were also some heavily-upvoted criticisms of Gemini which the Winklevii chose not to address, including the fact that Gemini’s fees are twice as high on its mobile app as it is for those who log in using a web browser. A response to this last question claims that Gemini is “taking advantage of the less sophisticated user.” The comments section of a post on the Winklevoss Capital website announcing Gemini’s formation is filled with many such answered criticisms of the platform.
Revolution or a Return to the Norm?
The heated debate sparked by the Winklevoss Twins and Gemini is part of a larger long-term argument that has only grown in step with cryptocurrency’s ascent into mainstream consciousness: should cryptocurrency be incorporated into existing financial structures, or is that a betrayal of its original revolutionary purpose? By adopting phrases such as “Revolutions Need Rules” and “Money Has a Future,” the Winklevii have smartly stoked the debate and attracted a lot of attention to Gemini. Whatever your stance on cryptocurrency’s relationship with regulators, it is clear that this will play a crucial role in shaping the future of cryptocurrency adoption. With Gemini and their long-proposed ETF, the Winklevoss Twins are positioning themselves as important figures in the space’s on-going evolution.