A new cryptocurrency by fintech startup Circle, a company backed by Wall Street giant Goldman Sachs, is aiming to be a digital version of the US dollar, writes the Independent.
Circle has announced that the new USD Coin will be free from volatility issues due to it being pegged to US dollar, offering it a stable value in order for it to be used as a working currency, rather than just an investment tool, the company says. Circle also claim it will be a faster and more secure version of the US dollar.
The underlying technology behind the proposed USD Coin will not be decentralized peer to peer, as it’s backed by fiat currency and released by a major financial institution, although it will be an electronic cash system, according to the company. People will also not be able to mine the USD Coin in the same way other cryptocurrencies can be generated, as the only way to acquire them is to buy them.
It is the second cryptocurrency-related announcement from Goldman Sachs in the space of a month, following news that the bank had plans to open its own crypto trading desk on behalf of its clients. The startup clearly views the backing of Sachs as a huge driver of the project, commenting on its blog post:
“Existing fiat-backed approaches have lacked financial and operational transparency, have operated in unregulated jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed proprietary technologies.”
Matthew Newton, analyst at crypto retailer eToro, sees the move as inevitable, suggesting that this has been coming:
“This shouldn’t come as a huge surprise to anyone who has been paying attention to cryptocurrencies over the last 18 months. Any forward-looking financial institution needs to understand this technology and accept its enormous potential.”
Newton goes on to argue that big banks have been investing in research and development of blockchain and cryptocurrency for some time. The trading platform will be the first of any major Wall Street institution and is expected to add further legitimacy, particularly following so close after Goldman Sach’s Bitcoin futures announcement last month.
There is a suggestion that the company may announce cryptocurrencies tied to other traditional currencies in the future, such as the pound and the euro.
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