The group aims to promote the mainstream adoption of a new class of cryptocurrencies known as Stablecoins. Stablecoins are cryptocurrencies backed by government currencies like the USD.
Coinbase Partners with Circle to Boost USD Coin Adoption
Two of the world’s largest cryptocurrency exchanges joint forces on a project aiming to promote the use of cryptocurrencies backed up by real money. The companies, Circle and Coinbase both valued for more than $8 billion will launch one such coin on Tuesday. The joint venture is starting off with the launch of USD Coin as its first stable coin. USD coin will become available for trading on Coinbase trading exchange on Tuesday next week.
Both Coinbase and circle are regulation abiding US cryptocurrency exchanges. With the level of regulation insufficiencies in the crypto space, this move aims to establish more ground rules in the quicky evolving asset class. The two firms launched the Joint Venture, CENTRE Consortium on Tuesday. The major objective of the joint venture according to the two companies is to speed up the adoption of cryptocurrencies backed by actual government legal tenders.
“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,” Circle co-founders Jeremy Allaire and Sean Neville said in a news release Tuesday.
Why Stablecoins? Why Now?
Circle launched its own version of the U.S dollar in May constituting of the stable coin. The cryptocurrency tech firm revealed that despite the decline in the value of bitcoin, cryptocurrency is here to stay. Circle built USD Coin will on Tuesday trade on the popular cryptocurrency exchange Coinbase. This will mark the first time Coinbase has supported a stable coin.
The two companies believe that every fluctuated price of bitcoin renders it not appropriate to function as a means of payment. A stable coin like Circle’s USD Coin, however, is built exactly like the US dollar. This means the coin will feature a more stable value just like its original paper version. Circle developed the USD Coin on the Ethereum Blockchain and revealed that each USD Coin will is backed up by a real U.S Dollar held in accounts subject to regular public reporting of reserves.
“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,” Coinbase revealed in a blog post.
However recent history attests to the claim that stablecoins are really stable. In early October, the Tether, another stablecoin shed most of its value following a report that exchange was insolvent. This exposed the stablecoin to a lot of criticism about its claim that it is backed by the U.S Dollars.
Circle CEO Jeremy Allaire believes that future trades or investment might not be possible in bitcoin. In a CNBC interview, he said investors will still rely on government-issued currencies and developing these currencies in the blockchain is his best bet.
Meanwhile, the USD Coin will function like a blockchain version of the U.D, it will not replace the dollar. Allaire explained that the USD Coin is a way to make an existing dollar compatible with cryptocurrency infrastructures.
“If people can exchange value over the internet without a toll extracted for payments it’s pretty dramatic,” Allaire said at the October Security Token Academy conference in Manhattan. “It’ll make the web look like a cute experiment comparatively speaking in 10 to 15 years.”
Imagine sending real dollars like bitcoin, reduced transaction fees, faster transactions, and portability. However, hiccups might come from regulators since both Coinbase and Circle are regulation abiding firms. Possibly it won’t be much different from the existing banks and digital money transfer platforms like PayPal.
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