Circle on Thursday announced that world’s biggest crypto exchange would from now on accept USYC, a type of stablecoin that provides share of yield to investors, as collateral from institutional users.
While the move will be of interest primarily to a technical class of traders, the new agreement is significant as yet another move in the rapid intersection of the mainstream and crypto sphere of finance.
Circle, a recently listed company that is the world’s second-largest stablecoin issuer, acquired USYC as part of a much larger transaction in January.
Why USYC stands out from most other stablecoins is that it is a tokenized money market fund and, unlike many other more traditional stablecoins such as USDC and Tether, it pays out interest revenue to holders.
As Circle Chief Business Officer Kash Razzaghi says, one of the reasons that makes USYC so significant is that it allows for a source of collateral that institutional traders appreciate.
A good many of these traders now collateralize with money market securities if they want to trade on cryptocurrency exchanges like Binance.
This works for trading purposes, but it becomes cumbersome when transactions take a day or more to settle. The delay is especially noticeable on weekends. During those times, the 24/7 clearing systems used by non-crypto currencies remain unavailable.
USYC enables instant stablecoin collateral settlement
Razzahi says traders who deposit USYC don’t face that issue, as they can instantly redeem the collateral for its peer stablecoin USDC. This quick redemption makes USYC a viable substitute for traditional dollars.
Where many institutional traders that trade on exchanges such as Binance put up collateral in Bitcoin or other digital currencies, more risk-averse institutions shy away from doing so.
This is in part as a result of FTX’s infamous collapse, leaving many with reservations about leaving collateral up on an exchange. Chen stated that Binance has tried to solve this issue through a solution called Banking Triparty. In this setup, the company partners with traditional banks, allowing them to act as custodians.
These banks then collateralize securities deposited with them for crypto transactions. She further stated that most of these same players collaborate with Binance on adopting USYC so that settlement is facilitated much faster.
Binance announced on Thursday that it will include cUSDO, a yield-bearing stablecoin. OpenEden Digital, a licensed and regulated company in Bermuda, created cUSDO under the name OpenEden OpenDollar.
