BitGo introduces USDS Stablecoin, aiming to change market dynamics

Palo Alto-based cryptocurrency custody firm BitGo has launched a new stablecoin, USDS, which will launch in January 2025.

The company says the stablecoin will be fully backed by US dollars through a combination of short-term Treasury bills, overnight repos and cash in order to ensure liquidity and minimize risk.

New Approach to Stablecoin Rewards

According to a September 18 statement from BitGo, its proposed offering will differ from existing mainstream stablecoins such as Tether (USDT) and Circle’s USDC by using an open stake model.

This approach will reportedly allow up to 98% of earnings generated from USDS reserves to go to its network participants, including liquidity providers and institutional exchanges. Traditionally, returns from stablecoins have gone primarily to issuers or a limited group of stakeholders.

Also, transparency seems to be a key selling point for USDS. BitGo says it will offer real-time proof of reserves, allowing participants to monitor the assets backing it on the platform’s website.

In addition, third-party accounting firms will audit the reserves every month, a move the company hopes will bolster confidence in the safety of the stablecoin.

The company aims to list USDS on major exchanges and has set a goal of reaching $10 billion in stablecoin assets by the end of its first year.

Implications for the Stablecoin Market

While BitGo’s new approach may yet pique the interest of users, USDS still faces an uphill task to make a notable impact in the stablecoin space.

For example, the latest data from the on-chain analytics platform Token Terminal shows that USDT alone accounts for up to 75% of the stablecoin market. Interestingly, just two years ago, its market share was 55%. The stablecoin also boasts a market capitalization of $118.5 billion, which is about $83 billion more than the second-ranked USDC.

Despite recent rumblings from detractors accusing Tether of being a multi-billion dollar fraud, the stablecoin made more than $400 million in the last month alone.

For its part, USDC is also trying to grow its footprint around the world. On September 17, its issuer announced that the stablecoin will now be linked to real-time payment systems in Mexico and Brazil. The move aims to make USDC more efficient for cross-border transactions and corporate finance in both countries.

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