Circle, the $3 billion bitcoin startup backed by investment banking giant Goldman Sachs, has created a cryptocurrency “stablecoin” whose value is pegged to the U.S. dollar and backed by physical currency stored in company-owned bank accounts.
Announced on Wednesday, the new cryptocurrency — USD Coin (USDC) — will allow individuals and institutions to tokenize physical currency for use in overseas trading and other cross-border transactions that require rapid settlement.
Commenting on the announcement, Jeremy Allaire and Sean Neville, co-founders of Circle, said:
“When we founded Circle five years ago, we and many in the crypto community envisioned fiat money and financial contracts executing on top of distributed public network infrastructure, building on open standards that would allow us all to share value as instantly and easily as we can access content in web browsers and exchange messages in email and messaging apps. Just as HTTPS, SMTP and SIP enabled free borderless information sharing and communications, crypto assets and blockchain technology will enable us to exchange value and transact with one another in a similar way: instantly, globally, securely and at low cost.”
Circle previewed USDC back in May in tandem with its announcement that it had achieved a $3 billion valuation following a Series E funding round led by bitcoin mining giant Bitmain.
Contrary to most other USD-backed stablecoins, Circle will not be USD Coin’s sole issuer. Instead, the token will in the future have multiple issuers as more organizations join CENTRE, an open-source consortium launched to develop a decentralized network of fiat stablecoins.
Per CENTRE’s organizational guidelines, USDC issuers must possess regulatory licenses authorizing them to handle electronic money, have audited anti-money laundering and compliance programs, provide audited monthly reports demonstrating that tokens they have issued are fully-backed by reserves stored in bank accounts, and agree to redeem all USDC tokens — including those issued by other consortium members.
USDC is structured as an ERC-20 token on the Ethereum network. According to CENTRE, it utilizes a Ricardian smart contract that will allow the consortium to change the code if it determines a particular issuer is not fulfilling its obligations.
At launch, 30 partners have agreed to provide support for USDC, including top-10 cryptocurrency exchange DigiFinex. The token will also soon be listed on decentralized cryptocurrency exchange (DEX) platforms including Paradex and IDEX, as well as lending protocol Dharma.
Additionally, major cryptocurrency wallet services including Coinbase, BitGo, Ledger, and imToken will provide native support for USDC.
The consortium also includes cryptocurrency payment processor BitPay, whose merchant network received more than $1.2 billion in bitcoin and bitcoin cash payments in 2017.
“BitPay has always been supportive of open source crypto communities and blockchain initiatives and likes the direction CENTRE is taking with USDC,” said Stephen Pair, CEO of BitPay. “We envision a future where all digital assets and payments live on the blockchain.”
USDC joins a growing list of stablecoins seeking to unseat the controversial tether (USDT) as the dominant USD-backed cryptocurrency token. Just this month, cryptocurrency exchange operators Gemini and Paxos have launched stablecoins under the oversight of New York’s Department of Financial Services (DFS), creator of the rigorous BitLicense regulatory framework.
In an interview with Business Insider, Circle’s Allaire said that Poloniex — the cryptocurrency exchange Circle acquired earlier this year — will eventually replace tether with USDC, though he did not give a timetable for this transition.
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Last modified: May 20, 2020 5:58 PM UTC