Goldman Sachs-backed Circle launches USDC stablecoin crypto

Circle
CEO Jeremy Allaire.

Circle

• Cryptocurrency company Circle is becoming the first issuer of
  USDC, a new crypto “stablecoin” it helped develop.
• “Stablecoins” are cryptocurrencies pegged to real-world
  assets to give them price stability. USDC is pegged to the
  dollar.
• USDC is one of a number of stablecoins that have been created
  recently. There are now over 50 projects building stablecoins.

Circle, the crypto company backed by Goldman Sachs, on Wednesday
became the first official issuer of a new cryptocurrency pegged
to the dollar.

Circle will allow people to “tokenize” dollars by depositing them
through an online gateway. Depositors will be given USDC — US
dollar coins — in exchange. The goal is to create a digital
currency that has the price stability and confidence of the
dollar but can “move at the speed of crypto,” Circle CEO Jeremy
Allaire told Business Insider.

USDC is a new cryptocurrency developed by Centre.io, a startup
funded and spun out of Circle. USDC is open source and Circle
will follow the standards developed by Centre.io.

‘Stablecoins’ are booming

USDC is one of a number of so-called “stablecoins” — cryptos
pegged to a currency or asset — that have sprung up in the last
few years.

A report on the stablecoin market also released on Wednesday by
crypto wallet provider Blockchain said there are now over 50
projects in development. Around 20 have launched and have a
market value of around $3 billion.
Perhaps the most high-profile recent project is Gemini dollar,
backed by the Winklevoss twins.

“We’ve had a bit of a Cambrian explosion over the last 12-18
months,” Garrick Hileman, the report’s author, told Business
Insider.The
number of stablecoins in development has boomed over the last 18
months.Blockchain

Allaire told BI by phone this week: “So much of the promise of
blockchain infrastructure really requires that there is a fiat
token model.

“Everything from tokenized debt and lending, to securities and
investment contracts, to tokenized property — all of these things
that are so powerful. If you don’t have the ability to denominate
and collateralize transactions in fiat then it makes the use
cases for those much more difficult. It’s really a fundamental
building block for all of the excitement that exists around
crypto.”

Hileman said: “If you’re lending in a volatile cryptocurrency
like bitcoin you’re really putting yourself in a very vulnerable
position.

“For savings, for lending, for payments — and these are
categories worth trillions of dollars — stablecoins could make
some real headway where bitcoin has struggled to gain a
significant foothold.”

A ‘trustworthy’ Tether

Circle, which operates a range of crypto services, has raised
over $200 million from backers including Goldman Sachs and IDG
Capital. The Boston-based startup isn’t investing any of its own
money in printing USDC but Allaire said he expects to see “very
significant demand” from third parties.

30 industry partners have agreed to support USDC, Circle said in
a blog post on Wednesday. They include crypto exchanges such as
OKCoin and CoinEx, crypto lending startups such as
BlockFi and MoneyToken, and wallets such as Coinbase.

Allaire also pointed to the success of Tether as evidence for
stablecoin demand in the market. Tether is a stablecoin

developed by a company closely associated with major crypto
exchange Bitfinex. It is pegged to the dollar and has become
a key mechanism for offering dollar liquidity to customers of
crypto exchanges worldwide. Blockchain’s report on Wednesday said
Tether currently represents 98% of all stablecoin trading value
and 93% of all market value.

“There already exists a dollar-backed stablecoin in the market
that is one of the highest liquidity crypto assets in the world,
which is Tether,” Allaire said. “It has a daily trading velocity
of around $3 billion. This is already something that’s critical.”

However, Tether has
faced repeated criticism of the auditing of its dollar
reserves,
as well as claims of manipulation. Allaire called Tether
“problematic” and said: “From an industry perspective, there’s an
enormous amount of interest in a trustworthy stablecoin that the
ecosystem can use.”

Circle acquired Poloniex, a top 30 crypto exchange globally,
earlier this year. Poloniex uses Tether to offer dollar
exposure to customers. Allaire said he expected the platform to
transition to only using USDC for this function in future.

“Obviously we want to see an orderly transition in the market,”
Allaire said, declining to give a timeframe for the transition.

‘We can rebuild the global economic system on top of this
infrastructure’

“The starting use case it people who are effectively using fiat
stable coins as a kind of mechanism in the crypto capital
markets,” Allaire said of USDC.

“But I think the next layer, and so much of what we’re excited
about, is how this becomes part of the broader market
infrastructure that’s needed to rebuild the financial system on
top of crypto, which is what so many of us are here for. We
genuinely see that we can rebuild the global economic system on
top of this infrastructure.

“Really the opportunity is to move from paper-based, English
language contracts to codified contracts that allow us to
represent all forms of assets. As we like to say, the
tokenization of everything.”

Centre.io requires USDC issuers meet certain compliance
standards, aiming to ensure trust in the system. As part of this,
Circle will work with four banking partners who will hold the
dollar reserves customers deposit. These reserves will be audited
monthly by Grant Thornton to make sure all USDC is backed
one-to-one by dollars. Allaire said Circle is only naming one of
its banking partners for now, US Bancorp Asset Management.