Canadian company Blockchain Venture Capital (BVC) has launched a new US dollar-backed stablecoin – called CUSD – that is fully compliant with the country’s regulatory requirements.
Stablecoins are crypto-assets that are pegged to the value of an external, tangible asset – such as national fiat currencies or gold. Most often, traders use stablecoins as an easy way to exit cryptocurrency markets in periods of high volatility to protect their portfolio value.
There’s no shortage of USD-backed stablecoins – such as Paxos, DAI, and Tether – which to a large extent all fulfil exactly the same role within the cryptocurrency ecosystem.
However, many stablecoins have faced close scrutiny regarding whether their issuing company actually holds the coin’s collateral assets in reserve, with regulators warning that without proper auditing, some stablecoins could face collapse.
Instead, alternative stablecoins are now emerging which offer compliance and transparency to investors, built with regulation in mind.
Compliance first
Despite facing tough competition in the marketplace from a multitude of other dollar-backed stablecoins, CUSD may find institutional users relatively easily as it’s the first legally compliant platform for a dollar-backed coin in Canada.
The coin, which complies with Canadian federal regulations regarding crypto-asset transfer, has been designed in a transparent manner – likely in a bid to make it easier for companies to use the BVC platform.
Similarly, BVC is one of the first stablecoin platforms to publish details of its collateralised assets – the number of real USD the company holds in escrow – publicly each day. According to BVC’s website, the circulating supply of CUSD directly correlates to real USD held in reserve.
This is in contrast to well-known USD-backed stablecoin Tether, launched by the Bitfinex exchange, which has faced widespread criticism for holding less than 100% of its issued tokens as USD – with the rest held in undisclosed assets.
Coin Rivet reported in May that just 74% of Tether was backed by USD. This has drawn the ire of regulators in the US who claim that Tether has been used to mislead users and manipulate the cryptocurrency markets.
Canadian dollar stablecoin
Blockchain Venture Capital also launched a Canadian dollar-backed stablecoin, the CADT, back in July. The coin was aptly released during the country’s Canada Day celebrations, and according to a report from Reuters at the time, it was the first stablecoin of its kind.
In the future, platforms that are regulated and consistently transparent are likely to reduce the amount of counterparty risk currently associated with stablecoins.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.