BitGo to Launch Reward-Bearing USDS Stablecoin

BitGo, a market leader in crypto custody, is launching a new stablecoin called USDS in early 2025. This stablecoin will be pegged to the dollar and backed by short-duration assets like Treasury bills, overnight repurchase agreements (repos), and cash.

Introducing $USDS

The first open-participation stablecoin to redefine financial freedom.

Built on a foundation of transparency, USDS empowers the community by democratizing the stablecoin experience and putting the power back in your hands.

1:1 USD Backing: USDS is fully... pic.twitter.com/pfzXWGZ1ze

- BitGo (@BitGo) September 18, 2024

BitGo sets USDS apart in the saturated stablecoin landscape with its innovative approach to liquidity incentives. Unlike other stablecoins, USDS will reward institutions that contribute liquidity to its network.

BitGo USDS Aims to Foster Innovation and Reward Participation

At the Token2049 conference in Singapore, BitGo announced plans to launch a new stablecoin, USDS, in January 2025. According to the announcement, USDS will be the first open-participation" stablecoin. It will create an open and fair system, allowing a much wider range of participants in the stablecoin minting and usage process.

In an interview with CoinDesk ahead of his keynote at the Token2049 event, BitGo CEO Mike Belshe emphasized the motivation behind launching USDS.

Belshe stated that existing stablecoins are doing an excellent job of maintaining price stability and providing utility. However, a chance remains to create a more just and fair system. USDS aims to foster innovation and reward those who actively contribute to its ecosystem.

Belshe highlights that the value of a stablecoin is not just derived from the assets backing it. Instead, it comes from the active users, the liquidity they provide, and the access points they create for interchange.

Stablecoin is a cryptocurrency with a low volatility value. It is often backed by an asset, typically a fiat currency like the US dollar or commodities like gold.

This stability makes them a cornerstone of the cryptocurrency ecosystem, especially in trading and decentralized finance (DeFi). They provide much-needed liquidity and allow easier entry and exit points between traditional financial systems and the crypto world.

Therefore, Belshe's vision for USDS revolves around creating a stablecoin that serves its fundamental role and also encourages growth and participation.

Tether's USDT, with a market cap of around $119 billion, largely dominates the stablecoin market. Circle's USDC follows, with a market cap of about one-third the size of USDT.

BitGo's Regulatory Approach and Its Ambitious $10 Billion Goal for USDS

BitGo's new stablecoin, USDS, aims to stand out by offering a rewards-based model. This approach incentivizes institutions and provides liquidity by distributing a portion of the returns generated from its reserves.

Belshe explained that BitGo will pass back the returns earned from its underlying cash holdings to participants at the end of the month. While offering rewards, BitGo carefully navigates the regulatory landscape toavoid being classified as an investment contract.

According to Mike Belshe, the rewards model might appear similar to a dividend. The key distinction is that liquidity-providing institutions receive the returns rather than individual end users.

Some other stablecoins have attempted to offer yield-bearing models where end users receive returns. However, such models have often triggered regulatory scrutiny, leading them to classify these products as securities.

Therefore, the US government has banned them from the US market, just like the Mountain Protocol or Lift Dollar. They can still decide to restrict their operations to the US and comply with stricter regulations or only operate outside the US markets as securities.

BitGo aims to have its new stablecoin, USDS, listed on all major cryptocurrency exchanges to ensure broad accessibility and liquidity.

The company has set an ambitious goal of reaching $10 billion in assets held within USDS by next year. BitGo hopes to quickly scale adoption and attract significant institutional participants by securing listings on top exchanges.

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