Circle, a US cryptocurrency unicorn backed by Chinese investors such as Bitmain, IDG and CreditEase, said its US dollar “stable coin” will start trading on a number of exchanges this week. Circle said it aims to challenge tether, the predominant stable coin that is popular among traders in Asia and elsewhere.
We can rebuild the global economic and financial system on top of the blockchain and cryptocurrency infrastructure
Jeremy Allaire, founder and CEO, Circle
Jeremy Allaire, founder and chief executive of Circle, valued at US$3 billion following a US$110 million financing round in May led by cryptocurrency mining chip making giant Bitmain, said its stable coin would be audited by accounting firm Grant Thornton on a monthly basis.
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The value of a stable coin is pegged one-to-one to another stable asset, such as the US dollar, and is, hence, less volatile than cryptocurrencies such as bitcoin. Used for settlement of cryptocurrency trades, stable coins enable faster settlement times than fiat currency or legal tender.
Circle said its stable coin, USDC, or US Dollar Coin, was fully backed by a US dollar reserve.
Beijing-based Bitmain, which is planning a flotation in Hong Kong of up to US$3 billion, has partnered with Circle with the aim of introducing stable coins backed by other fiat currencies.
“In becoming our partner for USDC, Bitmain shares a common vision with Circle, in that we can rebuild the global economic and financial system on top of the blockchain and cryptocurrency infrastructure. A fiat stable coin is a critical part of this infrastructure,” said Allaire.
Globally, many initiatives are aiming to create another stable coin that can challenge tether, the controversial stable coin with a US$2.8 billion market capitalisation. The cryptocurrency with the world’s largest market cap is bitcoin, at US$111.87 billion. Tether has not backed up its claim of having a US dollar reserve through an audit by an accounting firm.
Circle will launch USDC with four reserve bank partners, one of which Allaire said was US Bancorp Asset Management, a subsidiary of US Bank National Association. These partners will receive US dollar deposits from individuals or institutions that want to convert them into USDC, and will hold the dollars in a pool of reserves.
Circle’s stable coin will be traded on exchanges such as Huobi, OKEx, DigiFinex and CoinEx, which are popular among traders in China and Hong Kong, and Circle’s own exchange, Poloniex.
Circle, founded in 2013 with early backers such as Goldman Sachs and Chinese internet giant Baidu, started offering cryptocurrency trading services in Hong Kong in March 2018, targeting institutional investors.
Allaire said other stable coins pegged to other currencies would be announced soon, with Circle being just the first to develop a US dollar version ahead of other financial institutions keen on developing stable coins backed by other currencies.
He added that Circle had a bigger ambition – it wants USDC to be a stable coin that can be used to transact and settle conventional financial assets, such as debt, equity, real estate or financing contracts. These securitised assets, implemented on blockchain smart contracts, are today classified by regulators as security tokens. In many jurisdictions, dealings in security tokens are subject to security laws and regulations.
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Dave Chapman, the chairman of Hong Kong-based cryptocurrency broker Octagon Strategy, said his team had observed a growing demand for stable coins from clients.
“Stable coins can provide safety during periods of volatility, as traders can liquidate their positions in a stable coin quickly with the assurance of price stability,” he said. Currently, Octagon supports trading in tether and TrueUSD, another stable coin.