Circle and Coinbase, two of the largest and most popular cryptocurrency companies, are partnering to improve the stablecoin concept. On Tuesday, the startups announced the CENTRE Consortium, a joint venture that aims to speed up adoption of cryptocurrencies backed by actual fiat currencies like US dollars.
In May, Circle launched its own US dollar stablecoin, called USD Coin (USDC). The $3 billion fintech startup has made a series of deals and announcements in a long-term bet that despite the bear market, the crypto economy will persevere. The USD Coin was one of those bets, and it was available for use on Coinbase's wallet since yesterday. It is Coinbase's first ever listed stablecoin.
Bitcoin's (BTC) price has fallen to $6,000 since its rise to $20,000 last year, making it difficult to use as a store of value. A stablecoin like Circle's USDC is meant to represent a single US dollar. It is a 1:1 representation of the greenback on the Ethereum (ETH) blockchain. Circle emphasizes that each USD Coin is collateralized by a corresponding US dollar, held in accounts subject to regular audits and public reporting.
Circle cofounders Jeremy Allaire and Sean Neville stated: "Coinbase and Circle share a common vision of an open global financial system built on crypto rails and blockchain infrastructure, and realizing this vision requires industry leaders to collaborate to build interoperable protocols and standards."
Coinbase added in a blog post: "We see USDC as a major step towards a more open financial system. The advantage of a blockchain-based digital dollar - like USDC - is that it is easier to program, send, use in apps, and store locally than traditional US dollars."
Other stablecoins have proved to be less than stable. In October, the price of Tether (USDT), which is supposedly pegged to the US dollar, fell below 90 cents after reports that the Bitfinex exchange was insolvent. Tether critics have long claimed that USDT is not backed by the equivalent amount of US dollars.
The groundbreaking partnership between Circle and Coinbase should be a positive development. Some believe that it will help users try decentralized applications without balance sheet risks. Others are unsure, citing Dapps' unappealing interfaces and need for native tokens. Whatever the impact on Dapps, the partnership will help Circle's mission to apply the speed and security advantages of crypto to the US dollar.
The author owns a small amount of BTC.
- https://www.cnbc.com/2018/10/23/cryptocurrency-giants-coinbase-and-circle-form-a-joint-venture-to-boost-adoption-of-dollar-backed-stable-coins.html
- https://www.cnbc.com/2018/10/12/circles-head-scratching-deals-take-shape-as-cryptocurrency-bet.html
- https://blog.coinbase.com/coinbase-and-circle-announce-the-launch-of-usdc-a-digital-dollar-2cd6548d237
- https://theblockcrypto.com/2018/10/16/tether-has-found-a-new-bank-in-the-caribbean/
- https://twitter.com/KyleSamani/status/1054785049009291265
