Goldman Sachs-backed finetech company, Circle announced today that it will soon launch a faster, better and digital version of the U.S dollar.
This means you will soon be able to pay for your everyday needs in crypto just like you use your credit cards and online payment systems today.
The cryptocurrency named as Circle USD Coin will be pegged to the US dollar and you would be able to purchase it by trading real money. This is the first time that a digital currency had been released by a major financial institution.
“It unlocks an incredible amount of power for the dollar,” said Jeremy Allaire, CEO of Circle. “It’s basically a dollar that operates on blockchain.”
As the Circle USD Coin is not compliant with the decentralization system and differs from the distributed cryptocurrencies like Bitcoin, it might bring some stability to the frequently stumbling crypto market.
“Transacting in currencies which fluctuate with extreme volatility creates complexity and fragile settlement contracts, especially when compared to transacting in “tokenized fiat money” or fiat-pegged crypto assets,” Circle said in a blog post.
Circle told CNBC that it did not want its cryptocurrency to be subjected to the instability that other unregulated virtual currencies face, so for that the startup has tied the value of its cryptocoin with the US dollar. Now again this goes against the whole point of cryptocurrencies that were created to build a transparent financial system that would not fall under regulations of federal governments.
Allaire said that Circle will also add digital tokens for Euro and Pound, eventually however before that, it will work on pegging tokens with some Asian currencies because of the competition in those markets.
The USD Coin will run on the Ethereum blockchain for the foreseeable future but Allaire says the startup is open-minded about other platforms too.
“Ethereum is the best bet but it’s not necessarily the end game,” he said. “For now it’s specifically on Ethereum.”
Unlike traditional cryptocurrencies that are mined by crypto enthusiasts with the use of their computer’s computing power, the USD Coin will only be available through direct purchasing via the US dollar.
The whole USD Coin mechanism would resemble that of the open-source Venmo, where you can pay for things through cryptocurrencies, instead of your debit or credit cards. 1 dollar for 1 USD Coin, this will make it much easier for you to manage and use the coin for payments.
Strategic partnership with Bitmain
The Goldman Sachs-owned Circle also announced a $110 million round led by crypto mining firm, Bitmain that brought the startup’s valuation to $3 billion. Circle is one of the most well-funded blockchain startups having investments from some of the bigger names in the tech industry.
A lot of major financial institutions are showing interest in the crypto market lately. Goldman Sachs has already made a number of investments in the space and has also announced that it will trade Bitcoin on behalf of investors.