Regulated crypto custodian BitGo will launch USDS stablecoin

What’s new? US-based cryptocurrency custodian BitGo has unveiled its own USDS stablecoin with a dollar peg that will be used to reward liquidity provision. The asset is scheduled to launch in January 2025. USDS is backed by assets such as short-term US Treasury bills, overnight repos, and cash.

Press release

What else is known? The issuer is the New York-regulated BitGo New York Trust Company, launched in 2021. The asset is based on the idea of distributing profits to network participants instead of returning them to the issuer.

The official USDS website states:

“Traditional stablecoins earn interest on their reserves, and 100% of that interest income is retained by the issuer or funneled to exchanges, leaving you with nothing,” BitGo states on its USDS website.

BitGo plans to introduce a new reward system where up to 98% of profits will be directed to supporting ecosystem members. According to management, this approach ensures that all banks, exchanges, liquidity providers, and users have a vested interest in supporting and expanding the USDS network, contributing to a more inclusive and balanced ecosystem.

Custodian plans to allocate rewards to any company that can generate “sufficient liquidity” and registers with BitGo. Once registered and approved, participants in the rewards program must confirm ownership of the addresses where USDS are stored through a special portal. These addresses will be used to calculate daily balances and ensure that rewards are calculated fairly for participants.

The company will implement different tiers for participants, which will depend on the amount of USDS in storage. Payouts will be made every month.

Users will be able to issue USDS using dollars, as well as Tether’s USDT and Circle’s USDC stablecoins, using them as collateral. There are no fees for users to issue and repurchase coins; BitGo will cover all costs on its own.

The key difference between USDS and USDT or USDC is that BitGo aims to make token issuance and destruction available to a wider range of qualified users.

While the new coin could potentially compete with leading stablecoins, BitGo noted that it aims to remain neutral and drive the growth and adoption of the entire cryptocurrency ecosystem.

A $100 million funding round closed last August brought BitGo’s value to $1,75 billion. In October, BitGo bought the digital asset management platform HeightZero.

BitGo also acted as an intermediary in the payment of compensation to customers of the bitcoin exchange Mt.Gox, which went bankrupt in 2014, and is a custodian for the issuance of wrapped bitcoins (WBTC).