Crypto custodian BitGo is set to enter the stablecoin market with plans to launch a dollar-backed USDS stablecoin by 2025, according to a Sept. 18 statement.

USDS

BitGo stated that USDS will be fully backed by short-term Treasury bills, overnight repos, and cash, ensuring both high liquidity and minimal risk.

The firm also plans to publish real-time proof of reserves on a dedicated website, and for added transparency, a top-tier accounting firm will conduct monthly audits.

The company aims to stand out in the competitive stablecoin space by offering rewards to institutions that provide liquidity to its network. BitGo stated:

“USDS introduces a novel reward system that deploys up to 98% of earnings to participants who support the ecosystem. This approach ensures that all eligible institutions, exchanges, liquidity providers, and users are incentivized to support and grow the USDS network, fostering a more inclusive and balanced ecosystem.”

This move would represent a significant shift in the stablecoin market, where issuers have been raking in millions of profits. Data from TokenTerminal shows that the two largest issuers in the sector— Tether and Circle—generate around $525 million in monthly profits. The two firms control around 90% of the $170 billion stablecoin industry.

However, BitGo’s USDS will challenge this dominance by distributing most of its rewards to network participants instead of concentrating the profits for itself.

Rising institutional interest

BitGo’s move highlights the growing institutional interest in stablecoins.

Over the past year, major financial giants like PayPal and Ripple have ventured into this rapidly expanding sector.

Stablecoins are one of the most practical crypto applications in the real world, offering a stable alternative to volatile digital assets like Bitcoin. Venture capitalist Nic Carter, citing a recent report from Castle Island Ventures stated:

“[Stablecoin] are being used not just for crypto trading, but increasingly feature in the ordinary economic lives of these individuals. Saving in dollars was the 2nd most popular goal of users overall, and the #1 goal in Nigeria.”

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Japan’s DMM Group, along with its subsidiary DMM Crypto, is partnering with blockchain developer Progmat to explore the launch of a stablecoin under existing local regulations, according to an Aug. 23 statement.

Initially, the stablecoin will be integrated into DMM’s digital economy project, Seamoon Protocol. It will be designed to enhance stability and ultimately boost the value of the network’s planned native SMP token.

According to the statement:

“The stablecoin is intended to serve as a reserve currency underpinning the project’s treasury pool and a price stabilization mechanism for SMP–a soon-to-be-launched cryptocurrency intended to be the primary means of payment within Seamoon Protocol and DMM’s larger portfolio of companies.”

DMM Crypto CEO Nagato Kasaki said the planned stablecoin will help the firm to create an avenue for the global community to experience DMM’s cultural universe and co-create new experiences together through the Seamoon Protocol.

Three phase launch

According to the firm, the stablecoin’s mainnet launch will occur in three phases. The first phase of the launch will focus on stabilizing the Seamoon Protocol and its SMP token price by establishing a treasury pool using proprietary stablecoins.

Subsequently, the stablecoin will be introduced within the DMM ecosystem, serving as a payment method for transactions between DMM companies and business partners. This could include loan repayments and other uses, expanding the token’s utility beyond the Seamoon Protocol.

In the final phase, the stablecoin will be made available to registered partners and verified users. Over time, it is expected to become an alternative to credit card payments for these verified users.

Stablecoin growing market

DMM’s initiative comes amid the rapid growth of the stablecoin ecosystem, which has attracted new entrants.

According to CryptoSlate data, stablecoin’s total market capitalization has surged from just over $100 billion to a new all-time high of around $170 billion within the past seven months amid improved market conditions.

During this period, the market has witnessed the entrance of major crypto firms like Ripple, which have thrown their hats into the sector, while established players such as Tether’s USDT and Circle’s USDC have scored continued adoption and growth.

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Blockchain security platform Scam Sniffer reported that a crypto trader lost $55.47 million in DAI stablecoin to a phishing attack.

According to the firm, the trader lost their assets after mistakenly transferring ownership of their collateralized debt position (CDP) on DeFi Saver Proxy to a malicious wallet.

DeFi Saver Proxy is a proxy contract deployed by Maker, the issuer of DAI stablecoin, for traders managing collateralized debt positions (CDPs).

The victim, identified as ‘0xf2B8,’ executed a ‘SetOwner’ transaction, unknowingly redirecting ownership of their DeFi Saver Proxy contract to a phishing address. When the victim attempted to execute a transaction, it failed because they no longer owned the DeFi Saver Proxy.

The attacker then transferred ownership to another address and drained the entire $55.47 million in DAI from the victim’s account.

Yu Xian, the founder of blockchain security firm SlowMist, pointed out that the attacker utilized the notorious Inferno Drainer crypto wallet-draining kit to perpetrate the attack.

Meanwhile, the blockchain analytical platform Lookonchain stated that the attacker had exchanged 27.5 million DAI for 10,625 ETH as of press time.

Phishing exploits

This latest exploit highlights the continued threat of phishing attacks in the crypto industry. In these frauds, attackers impersonate legitimate entities to steal sensitive data and gain access to their victims’ crypto wallets.

According to a report by Scam Sniffer, Wallet Drainers, a type of phishing malware, are often used on these phishing websites to trick users into signing malicious transactions. This year alone, over $314 million worth of digital assets were stolen through phishing exploits in the first half of 2024.

These attacks affected 266,713 victims and involved various phishing methods, including Permit, Increase Allowance, Increase Approval, and Uniswap Permit2. Pendle tokens were the most affected assets, followed by Restaking and Aave Collateral assets.

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PayPal’s PYUSD stablecoin supply has grown by 90% after it expanded to the Solana blockchain in May, with its market capitalization surpassing the $500 million mark as of July 8.

According to DeFillama data, PYUSD’s total supply on Solana and Ethereum has reached approximately $520 million on July 8.

Solana is driving PYUSD growth

A breakdown of its supply across the two chains shows that $399 million, representing 77% of the total supply, is on Ethereum, while $118.65 million, equivalent to 23% of its supply, is on Solana.

However, further analysis of the data shows that its adoption on the Solana network is rising, with the supply on the network rising roughly 58% during the past week. In contrast, PYUSD supply on Ethereum dropped 6% during the same period.

Unsurprisingly, the increased supply and improved adoption also boosted its trading volume. Data from Visa and blockchain analytics platform Allium Labs shows PYUSD’s weekly transaction volume exceeded $500 million at the end of last month, up from previous averages of around $150 million.

This rapid growth prompted Solana developer Paul Fidika to describe PYUSD as a “sleeper hit on Solana” because it bolsters the blockchain network “as a legit financial alternative.” He added:

“[PYUSD] makes Coinbase and Circle irrelevant; their only utility is a fee-charge bridge between bank-accounts <-> crypto addresses.”

Solana-based DeFi protocols embrace PYUSD

Market observers noted that PYUSD’s integration with leading Solana-based DeFi protocols is helping it build an ecosystem on the blockchain network.

Solana has one of the largest thriving DeFi ecosystems, with the total value of assets locked on it ranking among the top five in the industry, according to DeFillama data.

The stablecoin is available on major Solana-based DEXs Jupiter and Orca, which are reportedly introducing new products designed to encourage its use. Furthermore, the stablecoin has also been integrated into Solana’s largest lending and liquidity protocol, Kamino Finance.

Tom Wan, an analyst at 21shares, pointed out that the DeFi platform offers a 23% annual percentage yield (APY) on PYUSD, which has proven attractive to investors seeking yield opportunities.

He stated:

“A lot of the success can be attributed to Kamino Finance. Over 38% of the supply has been lent on Kamino with a 23% APY. This is also a huge step for the adoption of token extension in DeFi.”

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Stablecoin payment platform BVNK has introduced Layer1, a self-custody digital asset infrastructure, according to a June 27 statement shared with CryptoSlate.

This platform helps businesses launch stablecoin payments quickly and securely, ensuring control and privacy over their digital assets.

Layer1

BVNK aims to streamline blockchain payments through its Layer1 solution. This initiative tackles infrastructure challenges, enabling businesses to quickly implement digital asset payments globally, even without extensive technical knowledge.

Layer1 specifically targets critical issues in current digital asset solutions. It accelerates time to market, provides blockchain abstraction, enhances data privacy and control, and integrates with existing systems.

Some of the solution’s automated functionalities include wallet creation, reconciliation, asset management, and integration with third-party services. It also supports automated consolidation, multi-venue trading, and comprehensive treasury management.

BVNK CTO and co-founder Donald Jackson said the product was designed to meet the increasing demand for blockchain products. He stated:

“Layer1 is the culmination of our learnings and it means that other businesses can launch digital asset payments without needing to be blockchain experts, to know how this or that network behaves, or when the next hard fork is coming – and without needing to deploy an entire engineering team to develop software for two years.”

Stablecoin payments

Layer1’s debut arrives amid robust expansion in the stablecoin sector. Between 2019 and 2023, annual stablecoin transactions surged 18-fold, reaching approximately $7 billion.

During this period, stablecoin holders peaked at 100 million, with the total market capitalization of assets in the sector reaching $160 billion, mostly made up of USDT. The industry has also attracted strong interest from traditional financial payment institutions like Visa and PayPal.

Jesse Hemson-Struthers, BVNK CEO, highlighted this rising appetite among various entities—from major financial institutions to trading firms and crypto enterprises—for self-hosted solutions in response to this growth.

He said:

“With Layer1, we’ve built a product that allows these firms to access core stablecoin payments infrastructure, so they can spend their time instead on building differentiated products.”

The Polkadot community wants to establish the blockchain network as a leader in stablecoin payments with a new proposal to boost adoption.

The proposal, which received unanimous community support, seeks to reduce the minimum balance for Tether’s USDT and Circle’s USD Coin (USDC) on the Polkadot Asset Hub to $0.01 from $0.07.

The community argued that this move would drastically boost Polkadot’s attractiveness to stablecoin users. However, the blockchain would still have to implement additional upgrades, like cutting transaction fees on Asset Hub by approximately 90% and implementing sub-1 block times on the network, to achieve its stablecoin payment goals.

The proposal stated:

“[These upgrades] together with super-apps such as Telenova, could make AssetHub (and therefore Polkadot) the home of cheap, fast & more importantly stable/ reliable stablecoin transfers — and serve as a perfect case study demonstrating the power of building on Polkadot.”

Nonetheless, community members agreed that the current proposal was a good start towards making Polkadot competitive against other blockchain networks that deal with remittances.

Stablecoins driving crypto adoption

Stablecoins have emerged as one of the most successful applications of crypto technology in the real world, especially in emerging markets like Nigeria.

Typically, stablecoins are pegged to the US dollar and designed to offer a stable alternative to volatile digital assets like Bitcoin and crypto users in struggling economies tend to use them to hedge against their falling national currencies and as a payment method for goods and services.

Market experts have predicted a strong demand for stablecoins, with Ripple forecasting the market to surpass $2.8 trillion by 2028. This growth has significantly boosted the adoption of blockchain networks like Solana, Tron, and Ethereum, which account for 87% of the $162 billion stablecoin market.

Blockchain analyst Lookonchain recently highlighted that Tether’s USDT on the TRON network achieved a 24-hour trading volume of $53 billion, outpacing Visa’s average daily volume of $42 billion during the year’s first quarter.

Moreover, PayPal expanded its PYUSD stablecoin to the Solana blockchain, citing the network’s lower transaction fees and faster processing times as critical advantages.

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Ripple CEO Brad Garlinghouse has announced the name of the company’s upcoming stablecoin at the XRP Ledger Community Summit (XRPL Apex) in Amsterdam.

During a panel discussion, Garlinghouse stated:

“The name of the Ripple stablecoin [is] RLUSD; I like to call it Real USD or Ripple USD.”

While Garlinghouse did not disclose the launch date, he expressed enthusiasm about the project, noting that it complements the broader XRP ecosystem. The RLUSD will be a dollar-pegged stablecoin available on the XRP Ledger and Ethereum.

This announcement follows Ripple’s recent appointment of Jack McDonald, CEO of its newly acquired Standard Custody, as Senior Vice President of Stablecoins.

XRPL EVM sidechain

RippleX, Ripple’s development arm, has announced the development of the XRPL EVM Sidechain. This would bring Ethereum Virtual Machine (EVM) compatibility to the XRP Ledger (XRPL).

This sidechain aims to open new opportunities for developers on the XRP Ledger, particularly in DeFi and real-world asset tokenization, driving innovation and expanding the network’s utility and reach.

The XRPL EVM sidechain will connect to the XRPL mainnet via a bridge, using wrapped XRP (eXRP) as the native asset and gas token. The bridge will enable seamless asset transfers between XRPL and the EVM sidechain, enhancing interoperability and transaction efficiency.

The Axelar bridge will be the exclusive bridge for sourcing the sidechain’s native gas token, and it will also support the transfer of other fungible tokens to and from the XRPL mainnet.

Ripple’s engineering team will also be collaborating with Peersyst to enhance XRPL’s interoperability and support the EVM sidechain launch. Peersyst CEO Ferran Prat said he was confident in the Axelar bridge, highlighting its industry-wide recognition and successful integrations, including Uniswap and Microsoft.

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Binance will limit the availability of “unregulated stablecoins” in the EU by June 30, aligning with the upcoming Markets in Crypto-Assets Regulation (MiCA), according to a statement released on June 3.

The crypto exchange indicated that several stablecoins might not comply with the new regulations and will face restrictions. However, it did not specify which stablecoins would be affected.

Binance said:

“This will be a first step entering the new regulatory framework and it will have a significant impact on the stablecoin market in EEA.”

Phased approach

Binance plans to implement a phased approach to meet the new stablecoin regulations in Europe.

The exchange will allow users to convert holdings in unregulated stablecoins to other digital assets such as Bitcoin, Ethereum, regulated stablecoins, and fiat currencies. It added:

“These transitional measures aim at allowing EEA users to switch to Regulated Stablecoins while avoiding any market disruption and complying with MiCA stablecoin rules. “

Additionally, Binance will implement restrictions across its entire product range, preventing users from accessing new products or services involving unauthorized stablecoins.

As of press time, Binance has not responded to CryptoSlate’s request for further comments.

Impending MiCA regulations

The European Union’s MiCA legislation is expected to be fully operational by the end of 2024, and stablecoin regulations will be enacted this month.

Under these new rules, only Electronic Money Institutions (EMIs) and credit institutions can issue stablecoins, aligning with the existing EU Electronic Money Directive (EMD). Major crypto exchanges like Kraken and OKX are working to comply with these regulations, which may include removing Tether’s USDT stablecoin from their platforms.

In contrast, Circle and its USDC stablecoin are well-positioned to meet these requirements. Circle applied for an EMI license in December 2023 after securing conditional registration in France. This move is part of Circle’s strategy to align with the EU’s MiCA regime.

Dante Disparte, Circle’s Chief Strategy Officer, emphasized the significance of MiCA, stating:

“MiCA is not crypto’s Y2K moment that can be ignored. Really consequential developments are underway for digital assets in the world’s third-largest economy.”

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