BitGo will launch USDS stablecoin to provide liquidity rewards to ecosystem participants

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According to a report by CoinDesk, cryptocurrency custodian BitGo announced plans to launch a U.S. dollar stablecoin USDS at the "Token2049" conference in Singapore. The stablecoin will reward institutions that provide liquidity to compete in this crowded market. stand out.

USDS will be backed by short-term treasury bills, overnight repurchase agreements (Overnight Repo) and cash, and is what BitGo calls the first stable currency open to participation. The company said USDS will be launched in January 2025.

BitGo CEO Mike Belshe said in an interview with CoinDesk:

“The main reason for launching USDS is that while existing stablecoins have great features, we believe there is an opportunity to create a more open and fair system that promotes innovation and, most importantly, rewards those who build the network. People. The real value of a stablecoin comes from the people using it, the liquidity they provide, and the access points to exchange.”

The stablecoin market is currently dominated by Tether's USDT, with a market value of approximately US$119 billion, followed by Circle's USDC, with a market value of approximately US$35.4 billion. Unlike its competitors, BitGo's USDS adopts a reward-based approach, incentivizing institutions that provide liquidity to the USDS network by allocating a portion of the rewards generated by stablecoin reserves.

"At the end of each month, we earn some compensation from the cash held by the underlying funds, and then we remit that to participants on a pro-rata basis based on the custody of the assets," Belshe said. This mechanism may sound close to dividends, resulting in the entire operation being classified as an investment contract, but the difference is that it does not distribute the proceeds to the end user, but to the institution providing liquidity.

Other USD stablecoins have tried to create yield-based stablecoins and reward end users, but as a compromise they have had to exclude the US market, such as the Lift dollar (USDL) issued by Paxos.

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Disclaimer: The content above is only the author's opinion which does not represent any position of Followin, and is not intended as, and shall not be understood or construed as, investment advice from Followin.
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