Winklevoss Twins Aim to Take Bitcoin Mainstream With a Regulated Exchange
Bitcoin, the virtual currency that was once the talk of the financial world, has been taking a beating over the last year with the price tumbling downward. — Now two of the biggest boosters of the virtual currency …
Context & Ripple Effects
This January 2015 piece captures Cameron and Tyler Winklevoss at the moment they commit to building Gemini, a New York-regulated Bitcoin exchange pitched as the bridge between virtual currency and mainstream finance — a bet made while Bitcoin's price was sliding and the currency's reputation was in retreat.
The arc that follows validates the thesis on their terms: within months Gemini wins New York regulator approval and starts trading, by 2017 the CBOE taps Gemini's market data for bitcoin derivatives pending regulatory approval, and by 2018 even NYSE owner ICE is reported to be building its own Bitcoin venue — while the same period exposes what the twins were positioning against, namely concerns that unregulated exchanges like subpoenaed Bitfinex were propping up prices.
First-order effects
- Gemini's regulated launch puts the Winklevosses directly against incumbent unregulated exchanges, offering mainstream investors compliance and custody that shadowier venues cannot match.
- New York regulators become the de facto gatekeepers of which Bitcoin businesses reach mainstream customers, with approval itself functioning as a competitive credential.
Second-order effects
- Traditional financial institutions follow the legitimacy trail: CBOE licenses Gemini data for derivatives, and ICE reportedly works on a Bitcoin trading platform for large investors, pulling Wall Street plumbing into crypto.
- As regulated venues gain traction, scrutiny intensifies on unregulated rivals like Bitfinex, widening the pricing and trust gap between compliant and offshore exchanges.
Third-order effects
- The Winklevosses formalize the regulated tier in 2018 with the Virtual Commodity Association, a self-regulatory working group alongside Bitstamp, bitFlyer USA, and Bittrex — an attempt to write the rulebook regulators haven't yet provided.
- If the pattern holds, Bitcoin market structure bifurcates into a regulated, institution-facing layer anchored by legacy exchange operators and a lightly governed offshore layer, with regulators' tolerance determining how much volume migrates.
The trend: Bitcoin is being absorbed into regulated financial-market infrastructure, with former boosters-turned-exchange-operators racing incumbents like ICE and CBOE to define the compliant layer.