A consortium of financial technology and cryptocurrency companies including Robinhood, Kraken and Galaxy Digital on Monday introduced a joint stablecoin pegged to the US dollar.
The aim of the newly formed Global Dollar Network is to accelerate usage of stablecoins worldwide and promote an asset that provides proportionate economic benefits to its partners, the companies said.
Why It’s Important
Stablecoins are digital tokens designed to keep a constant value. They are backed by traditional currencies such as the US dollar or euro.
As cryptocurrencies like Bitcoin have rocketed in value this year thanks to forecasts for lower US interest rates and the introduction of new crypto exchange-traded products, more companies have devoted resources to promoting stablecoins.
Stablecoins are often used for converting crypto tokens into traditional currencies because they are shielded from the wild price fluctuations seen in other cryptocurrencies.
The Global Dollar Network is based around a new stablecoin called USDG, which will be issued out of Singapore by crypto platform Paxos. The token will be governed by a committee made of representatives from the network’s partners, which also include Anchorage Digital, Bullish and Nuvei.
USDG will face the uphill task of elbowing into a concentrated market where the two biggest players – Tether and USD Coin – account for nearly 90 percent of the total market capitalisation, according to data from CoinGecko.
The move from the firms involved comes as crypto players largely anticipate US officials warming to digital assets, regardless of who wins the presidential election on Tuesday.
“Global Dollar Network will return virtually all rewards to participants and is open for anyone to join. It is designed to incentivise global stablecoin usage and accelerate societal wide adoption of this technology,” Paxos CEO Charles Cascarilla said.
© Thomson Reuters 2024
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