BitGo to enter stablecoin territory with USDS token

Cryptocurrency custodian BitGo plans to launch a dollar-backed stablecoin next year that offers rewards to liquidity providers.

BitGo is set to launch a dollar-backed stablecoin called USDS in January 2025, making it the first “open participation stablecoin” on the market. The stablecoin is “fully backed by short-term treasuries, overnight repo, and cash, providing high liquidity and low risk with real-time proof of reserves,” BitGo said in a September 18 post on X.

💸 Meet $USDS

The first open-source stablecoin that redefines financial freedom.

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

🏦 1:1 USD Support: USDS is completely… pic.twitter.com/pfzXWGZ1ze

— BitGo (@BitGo) September 18, 2024

BitGo aims to stand out by offering liquidity providers a share of the returns from its reserves, creating a new incentive model in a market currently dominated by Tether (USDT) and Circle’s USD Coin (USDC).

The move comes as BitGo, which holds a dominant 96.6% market share in the Wrapped Bitcoin market with its wBTC token, faces increasing competition from new entrants like Coinbase. On September 12, Coinbase launched cbBTC, a new ERC20 token backed 1:1 by Bitcoin that Coinbase custodies. The token is available on the Base and Ethereum networks, signaling a direct challenge to BitGo’s market leadership.

Meanwhile, some decentralized finance protocols are reconsidering their use of wBTC due to its links to TRON founder Justin Sun. Sky, formerly known as MakerDAO, is considering whether to remove wBTC as collateral from its lending platform SparkLend due to BitGo’s upcoming partnership with BitGlobal, which is thought to potentially shift control of wBTC to a venture associated with Sun.