- BitGo CEO Mike Belshe has revealed plans to launch a dollar-backed stablecoin next year
- The USDS stablecoin will be backed by short-term Treasury bills, overnight repos, and cash, with institutions earning rewards for providing liquidity
- BitGo aims to differentiate USDS by offering liquidity providers a share of the returns generated from its reserves
Crypto custody firm BitGo has revealed plans for a stablecoin at the Token2049 event in Singapore which offers liquidity providers rewards. The stablecoin, set to launch next year, will be backed by a combination of short-duration Treasury bills, overnight repos, and cash. USDS will be the first stablecoin to feature a reward model, where institutions providing liquidity to the network will receive a portion of the returns generated by the coin’s reserves, creating what BitGo calls the first open-participation stablecoin.
Rewards for Liquiduty Poviders
BitGo’s CEO, Mike Belshe, shared the development with Coindesk before his keynote at Token2049, stating that the company’s aim with USDS is to foster a more open and fair system that rewards institutions playing a key role in providing liquidity:
The main reason for launching USDS is that, while existing stablecoins serve a good function, we see an opportunity to create a more open and fair system that promotes innovation and, most importantly, rewards those who build the network. A stablecoin’s true value comes from the people using it, the liquidity they provide, and the access points for interchange.
Unlike traditional stablecoins, which primarily serve as a medium for exchange, USDS introduces a model where the participants in the network are rewarded based on their contribution.
A key feature of USDS will be the distribution of monthly returns generated from the stablecoin’s underlying reserves to the liquidity providers. “At the end of each month, we generate some return from the cash being held in the underlying fund, and we will pass it back to the participants on a pro-rata basis,” Belshe explained.
No Risk of ‘Security’ Classification
Belshe was also careful to clarify that the company’s unique approach steers clear of being classified as a security, as the rewards are distributed to institutions rather than individual end-users. This should ensure that the Securities and Exchange Commission can’t take its traditional action of shutting the project down within five minutes of launch.
In comparison to other stablecoins that have tried offering yields but faced regulatory barriers, especially in the U.S., BitGo’s model aims to avoid such pitfalls. Belshe mentioned how other yield-bearing stablecoins have had to exclude U.S. users to avoid securities classification. BitGo plans to list USDS on all major exchanges and has set an ambitious target of reaching $10 billion in assets by next year.
