Fintech start up Circle is unveiling a US dollar backed stable coin joining a growing list of similar offerings. Like all fiat backed cryptocurrencies, the coin is meant to provide some stability to an otherwise highly volatile market. To this end, every Circle USDC that will be issued will be backed by actual USD reserves.
High price volatility continues to complicate the use of cryptocurrencies in daily transactions. The creation of stable coins is meant to solve this problem and help drive mainstream adoption.
“A price-stable currency, such as a token pegged to the US 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’s Sean Neville and Jeremy Allaire said in a blog post.
The stable coin is based on the open source Ethereum blockchain protocol. The framework is developed and governed by CENTRE “which will provide independent oversight of Circle’s offering.”
Of course, this is not the first project of this nature. Several fiat backed stable coins such as Tether exist. But perhaps what puts Circle USDC apart from the rest of the crowd is that it intends be audited in its quest for “financial and operational transparency.”
Another project for a stable coin known as Basis raised $133 million in funding in April, SEC filings show.
To Operate Within a Regulated Framework
Circle USDC will operate “within the regulated framework of US money transmission laws, and reinforced by established banking partners and auditors,” according to its cofounders.
The initiative has already raised $110 million from Bitmain – itself a major milestone and the biggest capital round by a blockchain company so far. The start up is celebrating five years this fall but it is now valued at about $3 billion. It currently serves about 7 million customers.
IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, and Pantera are also participating in the financing round. New investors Blockchain Capital and Tusk Ventures.
“Bitmain will help CENTRE introduce multiple fiat stablecoins in a variety of geo-currency zones,” according to Circle.
Acquired Poloniex
Circle recently acquired Poloniex cryptocurrency. Other Circle products include Circle Invest, Circle Trade and Circle Pay. The Circle USDC is part of a larger effort to provide financial interoperability across borders. Other fiat backed stable coins may thus be issued by other CENTRE network members as part of this plan.
Bitmain, a Chinese hardware provider generated about $4 billion in operating profit last year alone.
“The invention of cryptographic assets and blockchain-based computing have ushered in the next major era of the open internet. But a price-stable medium of exchange and store of value is missing, and badly needed in order for global financial interoperability to function reliably and consistently. Transacting in currencies which fluctuate with extreme volatility creates complexity and fragile settlement contracts,” the cofounders said.
Ultimately, the Circle USDC aims to break down economic borders currently manned by a few gatekeepers. If successful, the Circle USDC could eventually replace the old SWIFT transfer system used by several banks across the world. For now, USDC seems to have its eyes fixed on the same niche as Ripple, which also aims to ease cross border transfers. It will be interesting to see how this eventually pans out.