BitGo Launches USDS Stablecoin to Transform Market Dynamics

BitGo, a crypto custody company based in Palo Alto, has unveiled a new stablecoin named USDS, which is scheduled to launch in January 2025.

The firm asserts that this stablecoin will be entirely backed by U.S. dollars utilizing a combination of short-term Treasury bills, overnight repos, and cash to maintain liquidity and reduce risk.

A Novel Approach to Stablecoin Earnings

As per a September 18 announcement by BitGo, their new offering aims to differentiate itself from well-established stablecoins such as Tether (USDT) and Circle’s USDC by adopting an open participation model.

This strategy is expected to enable up to 98% of the earnings generated from USDS reserves to be distributed among network participants, including liquidity providers and institutional exchanges. Typically, the returns from stablecoins have been concentrated among issuers or a restricted group of investors.

Additionally, transparency appears to be a crucial feature of USDS. BitGo intends to provide real-time proof of reserves, allowing users to monitor the assets that secure the stablecoin on its platform’s website.

Moreover, independent accounting firms will conduct monthly audits of the reserves, a step the company believes will enhance trust in the stability and security of the stablecoin.

BitGo plans to list USDS on leading exchanges and aims to gather $10 billion in assets held within the stablecoin by the conclusion of its inaugural year.

Effects on the Stablecoin Landscape

Although BitGo’s innovative strategy may attract user interest, USDS still faces significant challenges to achieve a meaningful presence in the stablecoin arena.

For example, the latest information from the on-chain analytics tool Token Terminal indicates that USDT comprises approximately 75% of the stablecoin market. Notably, its market share was just 55% two years ago. USDT currently has a market capitalization of $118.5 billion, exceeding the second-placed USDC by about $83 billion.

Despite recent criticisms alleging that Tether is a multi-billion dollar fraud, reports claim the stablecoin generated over $400 million in the previous month alone.

In addition, USDC is also striving to expand its global presence. On September 17, its issuer announced that the stablecoin will be integrated with real-time payment systems in Mexico and Brazil. This initiative aims to enhance USDC’s efficiency for cross-border transactions and corporate financial operations within these two nations.