A pile of US dollar banknotes

After the announcement of the release of Facebook’s Libra coin, the stablecoin topic has taken over the news and social media. In a timely manner, the increasing need for liquidity in the crypto world has resulted in a wave of stablecoin issuance for the past few weeks.

One of the big recent stablecoin-related news was the announcement of the partnership between crypto startup Circle and crypto exchange and wallet company Coinbase. After launching their own digital dollar (USDC) in September 2018, Circle are now aiming to embrace other organisations wanting to issue a USD coin. Circle and Coinbase are starting a consortium named Centre and its main goal is to develop and support USD Coin.

A bit about Centre and their membership scheme

Centre is a framework that is membership-based and its goal is to popularise and expand the digital money idea via a governance plan. The USD Coin is Centre’s first project – a crypto coin which is 100% backed by U.S. dollar reserves and allows users to redeem USDC for dollars and vice versa.   

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At the moment Circle and Coinbase are looking for new members in their consortium as they aim to produce interoperable protocols for an open international financial system. This membership call comes in a period when Tether (issuer of the most popular stablecoin) is having transparency concerns following their failure to secure a dependable third-party auditor in addition to the troubling confession that USDT might not be backed by USD at all times. Nevertheless, USDC depicts the new generation of coins that aim to improve transparency while using a user-friendly technology that will boost the speed of cross-border payments.

Centre will enable almost immediate settlement across borders via new members that will contribute to the development of the network. Centre desires to attain a bigger level of interoperability that should allow USDC to work in-between various public and private chains. In order to provide a risk-free experience, Centre’s board of managers would supply “safe investment” guidelines.

Circle CEO Jeremy Allaire noted that USDC will be far different from Tether and commented:

Market infrastructure like stablecoins will become the base layer that supports every financial application. It has to be legitimate, trustworthy and be built on open standards.

How can an organisation join Centre and why?

Any organisation that wants to join Centre should first be “licensed and regulated to support electronic money services.” and to agree with Centre’s operating rules. Other requirements include complying with Anti-Money Laundering (AML), Know Your Customer (KYC) and Countering the Financing of Terrorism (CFT) rules and processes.

Any company wanting to join the consortium would have to meet the technological requirements of Centre’s protocol and to have custody of fiat reserves. All Centre members will have a sense of autonomy as they will be able to determine their own fee models for redeeming USDC. In addition, members will be able to develop their own financial products on top of the USDC network.  

This all sounds very tempting, but contrasting opinions exist as well. Gregory Klumov, CEO of Stasis explained his lack of enthusiasm:

Right now, everyone wants to develop their own stablecoin. Last year there were around 150 projects announced. Look at JP Morgan, and other banks like Silvergate and Signature Bank, which all have their own Ethereum-based coins. As long as they think they can gain market share on their own, they’re unlikely to join a consortium. There’s also the huge issue of regulatory uncertainty — we still don’t know how US regulators will address stablecoins, or crypto in general, down the road.

For the moment USDC is supported by Bitmain, Bitpanda, Crypterium, Chainalysis and Nitrogen.

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