BitGo announced the plans to launch a new dollar-backed stablecoin called USDS next year, offering rewards to institutions that provide liquidity.
The announcement was made during Token2049 conference in Singapore, where the crypto custody firm revealed its strategy for this new stablecoin.
Unique features of USDS, not your average stablecoin
The USDS stablecoin will be backed by short-term Treasury bills, overnight repos, and cash, similar to other stablecoins available today.
But for unique positioning, BitGo describes USDS as the first open-participation stablecoin.
BitGo CEO Mike Belshe shared that the main goal of launching USDS is to create a more open and fair system that encourages innovation and rewards those who contribute to the network.
“A stablecoin’s true value comes from the people using it, the liquidity they provide, and the access points for interchange.”
Stablecoin market is a big sector within the crypto industry
Stablecoins are cryptocurrencies whose values are tied to traditional assets like fiat currencies or gold, helping to stabilize their prices.
They play a quite important role in crypto trading and provide much of the liquidity in DeFi.
Tether’s USDT token dominates the market with a cap of about $119 billion, while Circle’s USDC, the second biggest stablecoin is significantly smaller.
BitGo’s approach with USDS will differ from its competitors by distributing a portion of the returns generated from its reserves back to institutions providing liquidity.
Belshe explained that at the end of each month, BitGo will share returns based on how much liquidity each institution contributes.
While this model might seem similar to yield, to dividend payments, Belshe clarified that it isn’t distributing proceeds to end-users but rather to institutions that support the liquidity of USDS.
U.S. stablecoin market is challenging
Other stablecoins already attempted to create yield-bearing options for users but often faced challenges in the U.S. market due to regulatory issues.
Belshe told that many projects have had to choose between targeting U.S. or non-U.S. markets, simply because of these complications.
BitGo wants to avoid these pitfalls by ensuring compliance while still offering attractive incentives for liquidity providers.
With plans to list USDS on all major exchanges and a target of $10 billion in assets held within the stablecoin by next year, BitGo’s entry into the stablecoin market could cause serious consequences.
USDS might encourage other companies to explore similar reward-based models, and eventually this could be a trend, potentially reshaping the stablecoin sector.
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