Goldman Sachs-backed Circle, a global crypto finance company, has announced the pending availability of a crypto US dollar. Circle bought Delaware-based cryptocurrency exchange Poloniex in February for roughly $400 million.
The new Circle USD Coin (USDC) is a stable coin supported by CENTRE, an open-source framework, and by a new partnership with Chinese Bitcoin mining company Bitmain, which is leading Circle’s latest funding round of $110 million.
The USDC will be an ERC-20 token. CENTRE will define the rules for minting, issuing and redeeming the coins.
In search of the unicorn: a true stablecoin
The USDC is designed to spur mainstream adoption of cryptocurrencies by reducing price fluctuations in Bitcoin and altcoins. Cryptocurrencies frequently experience dips and surges of 10-20-30% within a single 24-hour period.
As stated on Circle’s blog,
“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. There are several interesting approaches to solving this need, spanning algorithmic reimaginations of money supply to crypto-backed tokens to fiat asset-backed tokens.”
Circle’s USDC is not the only stable coin that’s attempting to succeed where Tether has floundered. Tether, popular among crypto traders, is a token that is allegedly pegged to the US dollar. Controversy has surrounded the coin because of its seemingly endless ability to spin up hundreds of millions of dollars without a proper audit, allowing for potential market manipulation. Circle is promising full transparency for USDC.
Cryptocurrencies Basis, Stasis and TrueUSD are stable coins that aim to minimize market fluctuations as well, disrupting, or displacing, fiat currencies.
“The stable coin market is booming these days. Partially due to the fact that the digital assets market stopped going up in a straight line and has been in a consolidation phase for the last six months,” says Gregory Klumov, CEO and Founder of Stasis. “There will be a natural competition among all stable coin issuers for clients, but at the end of the day, it is a good thing. Once recognized as a member of the liquid alternatives asset class and with the introduction of indices, the digital assets marketplace has the potential to grow 15x to 6-7% of global GDP in the coming years. That’s the equivalent of $5 trillion dollars, and stable coins will be a 10-20% part of it. So we are talking about a trillion-dollars pie to share.”
Circle has been trying to engineer that bridge between cryptocurrencies and the internet since its inception. “From the day we founded the company three years ago, we’ve focused on trying to build a new consumer finance company. And one that makes money work the way the internet works,” co-founder and CEO Jeremy Allaire told TechCrunch’s Natasha Lomas in 2016.
With four core products, Circle aims to reshape the global economy.
- Circle Invest – for easy entry into cryptocurrency investment
- Circle Pay, – a peer-to-peer payment service that lets you send money like a text – across the globe
- Circle Trade – an OTC crypto desk that moves over $2 billion each month
- Cryptocurrency exchange Poloniex
Circle’s core products align with the latest strategies from financial titan Goldman Sachs, which has announced the launch of its crypto trading desk for institutional investors.
It remains to be seen whether the alliance will subvert the primary goal of crypto enthusiasts who are seeking a decentralized future where people, and not banks, control the flow of currency, or truly ignite a fundamentally different financial system that redefines wealth and includes the two billion people worldwide who remain unbanked.