Winklevoss Exchange Gemini Shuts Down Accounts Over Stablecoin Redemptions

Two over-the-counter trading desks say their accounts at Gemini, the crypto exchange founded by U.S. investors Cameron and Tyler Winklevoss, were abruptly closed without explanation over attempts to redeem GUSD, the company's stablecoin first introduced in September.

The claims leveled against Gemini by the OTC desks, relayed under anonymity due to fears of reputational damage, hint at the business practices developing within the stablecoin market itself, now estimated to be worth nearly $3 billion.

In one instance, email correspondence obtained by CoinDesk shows an OTC trader based in Latin America had his account closed after he informed Gemini that he planned to redeem several million dollars of GUSD. Still, Gemini said in a statement to the trader that a review "Determined [the] account must be closed" and that it was "Not able to elaborate on the specifics for this decision."

When the desk later acquired GUSD from its own network, the trader said he was warned by Gemini staff that redeeming millions of dollars would harm the stablecoin.

In another instance, 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."

The trader provided emails to CoinDesk that show how Gemini closed the account without offering any reason, days after the desk redeemed GUSD. These issues are so widely known that an OTC desk with an active Gemini account told CoinDesk he's reluctant to redeem GUSD for fear of jeopardizing his account.

Gemini told CoinDesk the company has redeemed more than $133 million worth of GUSD, over half the supply created so far, with clients redeeming up to $40 million at a time.

A representative from a proprietary trading firm who uses the Gemini platform to trade and redeem GUSD, who asked to stay anonymous in order to avoid revealing which exchanges he uses, told CoinDesk the criticism lobbied by OTC traders may be influenced by competition rather than a lack of utility.

A third OTC desk told CoinDesk it was denied access to a Gemini account because it was allegedly offering a competing money-services business, despite the fact it believes it adheres to the same compliance principles as regional competitors that trade on Gemini.

In some ways, OTC desks do directly compete with exchange platforms like Gemini.