Circle Announces a Crypto Version of the US Dollar, Company Backed by Goldman Sachs
Goldman Sachs may not approve of cryptocurrencies but a firm backed by the bank has now launched a digital version of the US Dollar. The fintech startup Circle, announced today that it launching a new coin known as Circle USDC (USD Coin). This digital asset will be pegged to the US dollar. Before them, only Japanese banks have initiated the idea of creating digital currencies pegged to their national fiat currency.
The company suggests that blockchains have started a new era of open internet and cryptographic assets will play an important role in this. It suggests that a ‘price-stable medium of exchange and store of value is missing,’ adding that the industry needs a ‘global financial interoperability to function reliably and consistently.’
The company announced in a blog post, “A price-stable currency, such as a token pegged to the U.S. dollar, is critical for enabling mainstream adoption of blockchain technology for payments as well as for supporting maturation in financial contracts built on smart contract platforms, such as tokenized securities, loans, and property.”
Circle is trying to create a coin that solves the problem of volatility in the crypto space. Over the years, crypto coins have been criticized very frequently because they are not based on any stable or recognized underlying assets. This leads to frequent and aggressive volatility in prices which is caused solely by dwindling investor interest.
The blog further states, “Transacting in currencies which fluctuate with extreme volatility creates complexity and fragile settlement contracts, especially when compared to transacting in “tokenized fiat money” or fiat-pegged crypto assets.”
This coin is being developed by CENTRE, which will also provide independent oversight on the coin offering. The company has an over-the-counter wing as well. It will be increasing the minimum ticket size on bitcoin traders to $500,000, which is 2x the previous ticket size of $250,000. The move was announced last month by CEO Jeremy Allaire, despite the fact that crypto coin prices have been dropping rapidly since the beginning of this year.
This is not all that Circle is doing this year. It has also announced a massive $110 million funding round that will be le by cryptocurrency company Bitman. This would bring the total market capitalization of the company to $3 billion. The new funding round also included Pantera, Digital Currency Group, Accel, General Catalyst, Breyer Capital and IDG Capital. Even Tusk Ventures and Blockchain Capital, new entrants in this space were also in this group.
The company also suggests that Bitman will also be joining CENTRE to create and implement several more stablecoins backed by fiat currencies. This could help in bringing some traditional legitimacy to the crypto world.
One of the biggest challenges for the USD Coin will be to avoid a fate like Tether. The coin became very popular after it bright the idea of pegging the USD to digital currencies but has landed in hot waters since. The company’s Goldman backing could help it tread this territory. The reception of this coin will decide what happens next.