Boston-based Circle introduced on Wednesday tokenized U.S. dollars over public blockchains called USD//Coin or USDC. The move to introduce yet another stablecoin in the market is done in partnership with CENTRE open source consortium. The ERC-20 token will be audited monthly by Grant Thornton.
Circle.com is becoming a powerhouse in the cryptocurrency industry with impressive investors that include Goldman Sachs, Beijing-based Bitmain and other Chinese investors such as IDG Capital and CreditEase, among others. But unlike other blockchain ventures, the company has former members of Goldman Sachs and other Wall Street institutions on its team. Circle raised $100 million in May valuing the firm at $3 billion. That’s larger than the market capitalization of eight-ranked Tether (USDT) at $2.8 billion.
“Individuals and institutions can enroll in this service to deposit US dollars from bank accounts, convert those dollars into tokens usable everywhere the internet reaches … and redeem USDC tokens and cash out to bank accounts,” CEO Jeremy Allaire wrote on Circle’s blog on Sept. 26.
Tokenizing U.S. dollars is free but Circle charges 0.1% to redeem USDC. Four banks will receive U.S. dollar deposits from individuals or institutions and enable convertibility into USDC and vice versa. The banks will back USDC through fiat reserves.
Other stablecoins that are pegged to U.S. dollars include Tether, TrueUSD, Gemini dollar, Paxos and CarbonUSD. The last three made their debut earlier this month. Gemini and Paxos received approval from New York Department of Financial Services and are among the world’s first regulated stablecoins.
Circle’s CEO, Jeremy Allaire, said that stablecoins enable new global financial contracts, products and services on the internet. There are plans to tokenize other fiat currencies although no other details were provided. Other digitized cash could include Japanese yen, British pound, Euro and/or Korean Won, depending on the regulatory climate in which these sovereign currencies operate.
Circle was founded in 2013 and counts Goldman Sachs and China search giant Baidu as early investors. It began offering cryptocurrency trading services in Hong Kong in March 2018 that are aimed at institutional investors.
There are various compliance controls in place. Commercial issuers of USDC are required to be licensed to handle electronic money; have audited anti-money laundering (AML) programs; back all tokens on fully-reserved basis; audited monthly; and support fungible exchange and redemption of USDC tokens.
The token is available on Circle Poloniex, Circle Trade and more than 20 companies. “Other wallets, exchanges, and software applications can add support for the USDC token through the open ERC-20 standard,” the company announced.
USDC is expected to see wide use in Asia as it will be traded on exchanges that are popular in China and Hong Kong, per South China Morning Post. Given its backing from large Chinese investors, the move could significantly improve liquidity of digital assets in the country of 1.4 billion. It’s also traded on Poloniex.
Articles by Marvin Dumont: