At the Token2049 event in Singapore, BitGo announced plans to launch a new dollar-backed stablecoin named USDS next year.
A Fresh Take on Stablecoins
BitGo’s new stablecoin, USDS, will be backed by short-term Treasury bills, overnight repos, and cash, similar to many existing stablecoins, according to a Sept. 18 press release. However, the company is positioning USDS as an open-participation stablecoin. Unlike its predecessors, USDS will reward institutions that contribute liquidity to its ecosystem.
Incentivizing Liquidity Providers
The core feature of USDS is its unique approach to rewarding liquidity providers. Institutions that contribute to the USDS network will receive returns generated from the stablecoin’s reserves. These returns will be distributed based on the size of their contributions, providing a financial incentive for participating in the ecosystem.
Recent Developments and Risks
Amid these exciting announcements, BitGo faces scrutiny and potential challenges. Last August, a proposal from risk analysts at BA Labs suggested changing protocol parameters to minimize exposure to Wrapped Bitcoin (WBTC). This proposal is reportedly influenced by upcoming changes in BitGo’s custody arrangements, which will move its WBTC business from the US to Singapore and Hong Kong. The proposal highlights concerns about the involvement of prominent figures, such as Justin Sun, in BitGo’s operations. Sun’s previous associations with TUSD and the resulting market issues have raised alarms among some stakeholders. BA Labs expressed concerns that Sun’s involvement could present elevated risks to the USDS network. Despite these concerns, Belshe downplayed the risks associated with Sun’s involvement, stating that BitGo had anticipated such reactions and aimed to address them transparently.
The USDS stablecoin introduced by BitGo promises innovative solutions for market participants and new opportunities for liquidity providers. The company aims to make crypto assets more accessible and beneficial for all involved.
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